Table 1 Definition of variables and data sources

GDP

Natural log of real domestic product. Base year is 2005. Source: WDI (2013)

GOV

Natural log of general government consumption expenditure in constant terms. Base year is

2005. Source: WDI (2013)

INV

Natural log of gross fixed capital formation in real terms. 2005 = 100. Source: WDI (2013)

XP

Natural log of exports of goods and services in real terms. Base year is 2005. Source: WDI (2013)

INF

Average annual increase in the consumer price index. 2005 = 100. Source: WDI (2013)

PC

Natural log of private sector bank credit in real terms, 2005 = 100. It is calculated with the following formula:

{(0.5) × [PCt/P_et + PCt−1/P_et−1]}/[GDPt/P_at] where PC is credit to the private sector, P_e

is end-of period CPI, and P_a is average annual CPI. Source: Global Financial Development Database (2013)

BA

Natural log of Deposit money bank assets in constant terms, 2005 = 100. It is computed using the following formula:

{(0.5) × [BAt/P_et + BAt−1/P_et−1]}/[GDPt/P_at] where BA is deposit money bank claims, P_e

is end-of period CPI, and P_a is average annual CPI. Source: GFDD (2013)

LL

Natural log of broad money or M3 in constant terms. It is calculated using the following formula:

{(0.5) × [LLt/P_et + LLt−1/P_et−1]}/[GDPt/P_at] where LL is liquid liabilities, P_e

is end-of period CPI, and P_a is average annual CPI. Source: Global Financial Development Database (2013)

FD

Financial development index that we calculated with the method of principal components.

The index is a weighted average of three variables: private sector bank credit, deposit money bank

assets and deposit money bank liabilities, all three extracted from Global Financial Development Database (2013)

INF × PC

Interaction variable of inflation and private sector bank credit

INF × BA

Interaction variable of inflation and bank assets

INF × LL

Interaction variable of inflation and liquid liabilities

INF × FD

Interaction variable of inflation and financial development index