Does Inflation Harm Economic Growth? Evidence for the OECD

42 Pages Posted: 15 Aug 2000 Last revised: 6 Oct 2010

See all articles by Javier Andrés

Javier Andrés

University of Valencia - Department of Economics

Ignacio Hernando

Banco de España

Date Written: June 1997

Abstract

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).

Suggested Citation

Andrés, Javier and Hernando, Ignacio, Does Inflation Harm Economic Growth? Evidence for the OECD (June 1997). NBER Working Paper No. w6062. Available at SSRN: https://ssrn.com/abstract=226472

Javier Andrés

University of Valencia - Department of Economics ( email )

E-46022 Valencia, Valencia E-46022
Spain
(34 96) 382 8260 (Phone)
(34 96) 382 8249 (Fax)

Ignacio Hernando

Banco de España ( email )

Madrid 28014
Spain
+34 91 338 5186 (Phone)
+34 91 338 5678 (Fax)

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