Inflation Thresholds and Growth
International Economic Journal, Forthcoming
12 Pages Posted: 23 Nov 2011 Last revised: 19 Dec 2011
Date Written: March 25, 2011
Abstract
This paper investigates inflation thresholds that lead to higher growth rates using five-year averages of standard variables for 84 countries from 1965 to 2004. The historical experience has important policy implications for developing countries: (i) the catch-up effect has worked only when inflation is below 12%; (ii) the positive effect of human capital on growth has been present and significant when inflation has been below 15%; (iii) financial development has been effective only when inflation has been below 10%; (iv) government size has negatively affected growth when inflation has been below 10%; (v) trade has positively affected growth when inflation has been below 8%.
Keywords: Financial development, Economic growth, Thresholds, Cross-country analysis
JEL Classification: E31, E44, F36, O16, O47
Suggested Citation: Suggested Citation