Inflation, Volatility and Growth

Posted: 9 Sep 1996

See all articles by Ruth Judson

Ruth Judson

Board of Governors of the Federal Reserve - Division of International Finance

Athanasios Orphanides

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Date Written: May 1996

Abstract

This paper re-examines the relationship between inflation, inflation volatility and growth using cross-country panel data for the past 30 years. With regard to the level of inflation, we find that in contrast to current findings, which are based on cross-sectional time-average regression comparisons, exploiting the time dimension of the data reveals a strong negative correlation between inflation and income growth for all but very low inflation countries. To examine the role of inflation uncertainty on growth, we use intra-year inflation data to construct an annual measure of inflation volatility. Using this measure, we find that inflation volatility is also robustly negatively correlatedwith growth even after the effect of the level of inflation is controlled for.

JEL Classification: E31, O40

Suggested Citation

Judson, Ruth A. and Orphanides, Athanasios, Inflation, Volatility and Growth (May 1996). FEDS Paper Number 96-19. Available at SSRN: https://ssrn.com/abstract=3298

Ruth A. Judson (Contact Author)

Board of Governors of the Federal Reserve - Division of International Finance ( email )

20th and C Streets, NW
Washington, DC 20551
United States

Athanasios Orphanides

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

HOME PAGE: http://mitsloan.mit.edu/faculty/detail.php?in_spseqno=54058

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