The paper provides a theoretical and cross-country empirical analysis of the determinants of financial deepening, and finds that higher credit-to-GDP ratios are associated with stronger creditor rights and lower inflation, and that the marginal effect of improvements in creditor rights protection is declining as the rate of inflation increases. The analysis suggests that in a high inflation environment, controlling inflation and reducing macroeconomic volatility should be given priority. Once these goals are achieved, the focus of attention should shift to creditor rights protection and credit information management.
International Monetary Fund; June 2007
- ISBN 9781451911565
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- Title: Relative Price Stability, Creditor Rights, and Financial Deepening
- Author: Pablo Druck; Alexander Plekhanov; Mario Dehesa
Imprint: INTERNATIONAL MONETARY FUND