Even foreseeable rises in the rate of inflation interfere with the financial sector's capacity to allocate resources electively, according to a growing theoretical literature. These predictions are tested experimentally in this article. According to the data, there is a substantial and economically significant negative connection between inflation and the growth of the banking sector and stock market activity. The connection is also nonlinear. The marginal effect of inflation on bank lending activity and stock market growth decreases quickly as inflation increases. We also have evidence of thresholds. There is a noticeable decrease in financial sector performance in countries with inflation rates over 15%. Finally, although statistics show that higher inflation is not matched by higher nominal equity returns in low-inflation nations, nominal stock returns in high-inflation economies move almost one-for-one with marginal rises in inflation.