Date of Graduation


Document Type


Degree Type



Chambers College of Business and Economics



Committee Chair

Ronald Balvers


Three essays are presented. The first essay re-visits the P* model (developed by Hallman, Porter and Small, 1991) with an application to US data. The central idea behind the P* model is that the price level is determined by the money stock, output and velocity. This study brings together criticisms of the P* model together in an attempt to address the major concerns with an improvement upon the existing model. A horse race is then run between the original P* model, two variant P* models, and three other models---an atheoretic naive AR process and an ARMA process as well as a standard output gap type model (the Phillips curve approach). The results show that the P* approach modeled using a Hodrick Prescott filter marginally out-performs all the other models of inflation in terms of forecast accuracy, suggesting that it may be more useful for inflation-targeting purposes. The results indicate that models based on past information cannot outperform the more sophisticated P*-type models. The second essay looks at the relationship between financial development and growth from a developing country perspective, while controlling for financial repression. The proxy of choice is the ratio of currency outside the banking system (CB) to real output. The empirical results show that CB relates negatively to growth in countries that are less financially liberalized and positively with growth in countries that are more financially liberalized. An innovative measure of financial repression is then proposed that combines the use of currency inside banks and currency outside banks, and is tested concurrently with a broad money depth measure. The study concludes that there is overwhelming evidence that financial repression, which is indicative of financial under-development is negatively related to growth. The final essay implements an innovative approach that examines the impact of financial integration on financial development, and subsequently on economic growth within a sample of EU countries. The study looks at bank-based measures of financial development in an effort to establish whether a relationship exists between financial development and growth in the European Union countries, and if so, whether this relationship has been affected by financial integration. The results support the hypothesis that the benefits of economic and financial integration are not uniform.