Contrasting Models of the Effect of Inflation on Growth

24 Pages Posted: 5 Feb 2005

See all articles by Max Gillman

Max Gillman

Central European University (CEU) - Department of Economics

Michal Kejak

Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute)

Abstract

The paper formulates a nesting model for studying the theoretical literature on inflation and endogenous growth. It analyses different classes of endogenous growth models, with different usage of physical and human capital, with different exchange technologies. First, the paper shows that a broad array of models can all generate significant negative effects of inflation on growth. Second, it shows that these models can be differentiated primarily by the fact whether there is a Tobin-type effect of inflation and also whether the inflation-growth effect becomes weaker as the inflation rate rises, a non-linearity, or stays essentially constant over the range of inflation rates. The paper compares these features of the models to empirical evidence as a way to summarize the efficacy of the models.

Suggested Citation

Gillman, Max and Kejak, Michal, Contrasting Models of the Effect of Inflation on Growth. Available at SSRN: https://ssrn.com/abstract=661588

Max Gillman (Contact Author)

Central European University (CEU) - Department of Economics ( email )

Nador u. 9.
Budapest H-1051
Hungary
+36 1 327 3227 (Phone)
+36 1 327 3232 (Fax)

Michal Kejak

Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute) ( email )

Politickych veznu 7
Prague 1, 111 21
Czech Republic

HOME PAGE: http://www.cerge-ei.cz

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