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Working Paper

Inflation and Financial Market Performance

In this paper we investigate the empirical association between inflation and the functioning of an economy’s financial system. We find substantial evidence that inflation is negatively correlated with financial market performance, and, in addition, we find that the relationship between inflation and financial development exhibits significant non-linearities.

Working Papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.

Suggested Citation

Boyd, John, Ross Levine, and Bruce Smith. 1996. “Inflation and Financial Market Performance.” Federal Reserve Bank of Cleveland, Working Paper No. 96-17.