Inflation and Growth: The Role of Institutions
Journal of Economics and Finance, Forthcoming
29 Pages Posted: 17 Dec 2019 Last revised: 7 Sep 2021
Date Written: May 22, 2021
Abstract
This paper investigates the effects of inflation on per capita income growth for 36 developed and developing countries by using structural vector autoregression models that are robust to the consideration of endogeneity by construction. The results show evidence for heterogeneity of such effects across countries that are shown to be further connected to the strength of their institutions. While the effects of inflation on growth are negative and significant in countries with stronger institutions, they are positive and significant in countries with weaker institutions.
Keywords: Economic Growth, Institutions, Inflation, Structural VAR
JEL Classification: O11, O23, O43
Suggested Citation: Suggested Citation