The Effect Of Inflation On Growth

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Nonlinear Effects Of Inflationon Economic Growth

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Author : Mr.Michael Sarel
language : en
Publisher: International Monetary Fund
Release Date : 1995-06-01

Nonlinear Effects Of Inflationon Economic Growth written by Mr.Michael Sarel and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1995-06-01 with Business & Economics categories.

This paper examines the possibility of nonlinear effects of inflation on economic growth. It finds evidence of a significant structural break in the function that relates economic growth to inflation. The break is estimated to occur when the inflation rate is 8 percent. Below that rate, inflation does not have any effect on growth, or it may even have a slightly positive effect. When the inflation rate is above 8 percent, however, the estimated effect of inflation on growth rates is significant, robust and extremely powerful. The paper also demonstrates that when the existence of the structural break is ignored, the estimated effect of inflation on growth is biased by a factor of three.

The Effect Of Inflation On Growth

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Author :
language : en
Publisher:
Release Date : 2008

The Effect Of Inflation On Growth written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with categories.

The paper examines the effect of inflation on growth in transition countries. It presents panel data evidence for 13 transition countries over the 1990-2003 period; it uses a fixed effects, full-information maximum likelihood, panel approach to account for possible bias from correlations among the unobserved effects and the observed country heterogeniety. The results find a strong, robust, negative effect on growth, and one that declines in magnitude as the inflation rate increases. These results include a role for a normalized money demand, by itself and as part of a nonlinearity in the inflation-growth effect. And these results derive from both a baseline single equation model and one that is then expanded into a three equation simultaneous system. This allows for possible simultaneity bias in the baseline model. -- Growth ; transition ; panel data ; inflation ; money demand ; endogeneity

The Effects Of Inflation On Economic Growth

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Author : Jose De Gregorio
language : en
Publisher:
Release Date : 1991

The Effects Of Inflation On Economic Growth written by Jose De Gregorio and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1991 with Economic development categories.

Nonlinear Effects Of Inflation On Economic Growth

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Author : Michael Sarel
language : en
Publisher:
Release Date : 2006

Nonlinear Effects Of Inflation On Economic Growth written by Michael Sarel and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with categories.

This paper examines the possibility of nonlinear effects of inflation on economic growth. It finds evidence of a significant structural break in the function that relates economic growth to inflation. The break is estimated to occur when the inflation rate is 8 percent. Below that rate, inflation does not have any effect on growth, or it may even have a slightly positive effect. When the inflation rate is above 8 percent, however, the estimated effect of inflation on growth rates is significant, robust and extremely powerful. The paper also demonstrates that when the existence of the structural break is ignored, the estimated effect of inflation on growth is biased by a factor of three.

Does Inflation Harm Economic Growth

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Author : Javier Andrés
language : en
Publisher:
Release Date : 1997

Does Inflation Harm Economic Growth written by Javier Andrés and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1997 with Economic development categories.

The purpose of this paper is to study the correlation among growth and inflation at the OECD level, within the framework of the so-called convergence equations, and to discuss whether this correlation withstands a number of improvements in the empirical models, which try to address the most common criticisms of this evidence. The main findings are the following: 1) the negative correlation among growth and inflation is not explained by the experience of high-inflation economies; 2) the estimated costs of inflation are still significant once country-specific effects are allowed for in the empirical model; and 3) the observed correlation cannot be dismissed on the grounds of reverse causation (from GDP to inflation).

Nonlinear Relation Between Inflation And Growth Panel Data Analysis

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Author : Anna Miller
language : en
Publisher: GRIN Verlag
Release Date : 2013-10-24

Nonlinear Relation Between Inflation And Growth Panel Data Analysis written by Anna Miller and has been published by GRIN Verlag this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-10-24 with Business & Economics categories.

Master's Thesis from the year 2013 in the subject Economics - Economic Cycle and Growth, grade: 64%, University of Nottingham, language: English, abstract: This paper examines the inflation-growth interaction for different country groups with similar national incomes for the period 1970-2011. It could be confirmed that this relation is strictly nonlinear with a threshold level of inflation of 3% for high-income countries and 13% for low-income countries. Although this result is in line with previous empirical studies based on a similar data set, much smaller samples needed to be used to obtain these results. Inflation threshold levels are estimated using the iteration method and different panel-specific techniques. Strongly significant thresholds were yielded only when controlling for country-fixed effects. Policymakers can use the findings for high-income or industrialised countries as a guide for inflation targeting, however more precise analyses for less advanced countries are needed in order to be useful for monetary policy.

Threshold Effects In The Relationship Between Inflation And Growth

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Author : Mohsin S. Khan
language : en
Publisher: International Monetary Fund
Release Date : 2000-06

Threshold Effects In The Relationship Between Inflation And Growth written by Mohsin S. Khan and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2000-06 with Business & Economics categories.

This paper reexamines the issue of the existence of threshold effects in the relationship between inflation and growth, using new econometric techniques that provide appropriate procedures for estimation and inference. The threshold level of inflation above which inflation significantly slows growth is estimated at 1–3 percent for industrial countries and 7–11 percent for developing countries. The negative and significant relationship between inflation and growth, for inflation rates above the threshold level, is quite robust with respect to the estimation method, perturbations in the location of the threshold level, the exclusion of high-inflation observations, data frequency, and alternative specifications.

Inflation And Economic Growth

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Author : Robert J. Barro
language : en
Publisher:
Release Date : 1995

Inflation And Economic Growth written by Robert J. Barro and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1995 with Economic development categories.

Data for around 100 countries from 1960 to 1990 are used to assess the effects of inflation on economic performance. If a number of country characteristics are held constant, then regression results indicate that the impact effects from an increase in average inflation by 10 percentage points per year are a reduction of the growth rate of real per capita GDP by 0.2-0.3 percentage points per year and a decrease in the ratio of investment to GDP by 0.4-0.6 percentage points. Since the statistical procedures use plausible instruments for inflation, there is some reason to believe that these relations reflect causal influences from inflation to growth and investment. However, statistically significant results emerge only when high- inflation experiences are included in the sample. Although the adverse influence of inflation on growth looks small, the long-term effects on standards of living are substantial. For example, a shift in monetary policy that raises the long-term average inflation rate by 10 percentage points per year is estimated to lower the level of real GDP after 30 years by 4-7%, more than enough to justify a strong interest in price stability.

Threshold Effects In The Relationship Between Inflation And Growth

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Author : Anna Miller
language : en
Publisher: GRIN Verlag
Release Date : 2013-10-23

Threshold Effects In The Relationship Between Inflation And Growth written by Anna Miller and has been published by GRIN Verlag this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-10-23 with Business & Economics categories.

Essay from the year 2013 in the subject Business economics - Operations Research, grade: 73%, University of Nottingham, language: English, abstract: Up to the 1970s it was mostly observed that inflation does not have a significant effect on growth, or that the effect was even slightly positive (Sarel 1996). However, due to the following decades of high and persistent inflation in many countries1, the available data showed changes in the inflation-growth nexus. It was univocally confirmed that inflation has a negative impact on growth, and macroeconomic policies are aiming to spur growth by keeping inflation at low levels. This having said, intuitively the question arises, how low should the target inflation be? Or, which is the threshold level of inflation between a positive and negative impact on growth? Many authors in the 1990s attempted to solve this question, with fairly divers results. Sarel (1996) analysed a panel of 87 countries over the period 1970 to 1990 using OLS estimation. He finds a structural break at an average annual rate of inflation of 8%. Below this level, inflation has no significant effect on growth, but for inflation levels above 8%, growth is significantly and strongly negatively affected. Gosh and Phillips (1998) find a much lower threshold at 2.5%, and Christoffersen and Doyle (1998), applying Sarel’s methodology on transient countries between 1990-1996, obtain a threshold of 13%. Bruno and Easterly’s (1998) results are somewhat striking. Their analysis is based on a sample of 31 countries that experienced high-inflation episodes over the period 1961-1994, and results in the fact that inflation does not have a significant effect on growth for normal levels, however the relationship becomes negative with high-frequency data and highinflation observations of 40% or higher.Motivated by this variety of results, Khan and Senhadji re-examined this issue in their 2001 paper “Threshold Effects in the Relationship Between Inflation and Growth”. They contribute to existing work by extending and modifying their analysis compared to previous literature by, first, looking separately on developing and industrialized countries, and second, by applying new econometric methods, which include the non-linear least squares (NLLS) estimation combined with a hybrid function of inflation, where the threshold level is found with conditional least squares. Furthermore, Khan and Senhadji (2001) use the bootstrap method, proposed by Hansen (1999), in order to test for statistical significance of the threshold effect. Accordingly, their results differ in so far from previous work as the threshold...

Estimating The Inflation Growth Nexus A Smooth Transition Model

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Author : Mr.Raphael A. Espinoza
language : en
Publisher: International Monetary Fund
Release Date : 2010-03-01

Estimating The Inflation Growth Nexus A Smooth Transition Model written by Mr.Raphael A. Espinoza and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010-03-01 with Business & Economics categories.

Motivated by the global inflation episode of 2007-08 and concern that high levels of inflation could undermine growth, this paper uses a panel of 165 countries and data for 1960-2007 to revisit the nexus between inflation and growth. We use a smooth transition model to investigate the speed at which inflation beyond a threshold becomes harmful to growth, an important consideration in the policy response to rising inflation as the world economy recovers. We estimate that for all country groups (except for advanced countries) inflation above a threshold of about 10 percent quickly becomes harmful to growth, suggesting the need for a prompt policy response to inflation at or above the relevant threshold. For the advanced economies, the threshold is much lower. For oil exporting countries, the estimates are less robust, possibly reflecting heterogeneity among oil producers, but the effect of higher inflation for oil producers is found to be stronger.