Empirical Insights on Inflation, Financial Development and Income Inequality in Central and Eastern European Countries
Cifuentes-Faura, Javier; Simionescu , Mihaela
Year: 2025 Volume: 75 Issue: 1 Pages: 29-59
Abstract: Given the recent debates on high inflation and widening income inequality in the post-pandemic period, this paper examines the empirical relationship between inflation, financial development, and income inequality in Central and Eastern European (CEE) countries in the period 2004-2022 using advanced panel data models to account for potential endogeneity, long-run and short-run patterns. The findings suggest that inflation has a positive impact on income inequality. Financial development exhibits a negative association with income inequality in the long-run and its interaction with inflation reduces income inequality. This suggests that a more developed financial system can help to reduce income inequality by facilitating access to credit and financial services for all segments of the population.
JEL classification: C23, E31, O15
Keywords: inflation, financial development, income inequality, CEE countries
DOI: https://doi.org/10.32065/CJEF.2025.01.02
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