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Working Paper

Inflation and Financial Market Performance: What Have We Learned in the Last Ten Years?

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The last decade has witnessed a great deal of theoretical and empirical research on the relationships between inflation, financial market performance, and economic growth. This paper provides a survey of that literature and presents new cross-country empirical results on this topic. We find that inflation is negatively associated with banking industry size, real returns on financial assets, and bank profitability. We also discover a positive relationship between asset return volatility and inflation.
12.17.2003ISSN 2573-7953 WP 03-17DOI 10.26509/frbc-wp-200317
Keywords inflation, financial markets, economic growth, banking, financial assets
JEL Classification Codes E40, E44, O16

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, and Bruce Champ. 2003. “Inflation and Financial Market Performance: What Have We Learned in the Last Ten Years?” Federal Reserve Bank of Cleveland, Working Paper No. 03-17. https://doi.org/10.26509/frbc-wp-200317