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<p>This study employs a non-linear threshold regression model, utilizing inflation as the threshold variable, to examine the relationship between financial development and economic growth in Tunisia from 1965 to 2022. The analysis identifies a critical inflation threshold of 3.49%, which separates the sample into two regimes: low-inflation and high-inflation. The findings suggest that when inflation remains below this threshold, financial development has a significant positive impact on economic growth by facilitating efficient capital allocation, encouraging investment, and enhancing productive capacity. In contrast, when inflation exceeds 3.49%, these benefits are diminished: elevated prices disrupt financial intermediation and reduce investment efficiency. To ensure robustness, a causality test was conducted, confirming unidirectional causality from financial development, investment, and trade to economic growth. These results reinforce that improvements in the financial sector, capital accumulation, and international integration actively drive economic expansion rather than merely reflecting its outcomes. These results highlight that maintaining inflation below the critical threshold is crucial for maximizing the contribution of key macroeconomic factors to economic growth.</p>

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Non-linearity Inflation-Growth relationship in Tunisia: application with threshold regression model

  • 期刊论文

  • 发表日期：

    2026年2月13日

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  • Hamdi Becha,
  • Afifa Ferhi,
  • Maha Kalai,
  • Kamel Helali

摘要

This study employs a non-linear threshold regression model, utilizing inflation as the threshold variable, to examine the relationship between financial development and economic growth in Tunisia from 1965 to 2022. The analysis identifies a critical inflation threshold of 3.49%, which separates the sample into two regimes: low-inflation and high-inflation. The findings suggest that when inflation remains below this threshold, financial development has a significant positive impact on economic growth by facilitating efficient capital allocation, encouraging investment, and enhancing productive capacity. In contrast, when inflation exceeds 3.49%, these benefits are diminished: elevated prices disrupt financial intermediation and reduce investment efficiency. To ensure robustness, a causality test was conducted, confirming unidirectional causality from financial development, investment, and trade to economic growth. These results reinforce that improvements in the financial sector, capital accumulation, and international integration actively drive economic expansion rather than merely reflecting its outcomes. These results highlight that maintaining inflation below the critical threshold is crucial for maximizing the contribution of key macroeconomic factors to economic growth.