Threshold Effects in the Relationship between Inflation and Growth
32 Pages Posted: 31 Jan 2006
Date Written: June 2000
This paper reexamines the issue of the existence of threshold effects in the relationship between inflation and growth, using new econometric techniques that provide appropriate procedures for estimation and inference. The threshold level of inflation above which inflation significantly slows growth is estimated at 1-3 percent for industrial countries and 7-11 percent for developing countries. The negative and significant relationship between inflation and growth, for inflation rates above the threshold level, is quite robust with respect to the estimation method, perturbations in the location of the threshold level, the exclusion of high-inflation observations, data frequency, and alternative specifications.
Keywords: Inflation, Growth, Threshold Effects
JEL Classification: E31, O40
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Adjustment and Growth in Sub-Saharan Africa
By Evangelos Calamitsis, Anupam Basu, ...
The Effects of Inflation on Economic Growth: Lessons from Latin America
Effects of Macroeconomic Stability on Growth, Savings, and Investment in Sub-Saharan Africa: An Empirical Investigation
By Michael Hadjimichael, Dhaneshwar Ghura, ...
Macroeconomic Fluctuations in Sub-Saharan Africa
By Alexander W. Hoffmaister, Jorge Roldós, ...
Low Investment is Not the Constraint on African Development
By Shantayanan Devarajan, William Easterly, ...
A Capital Market in an Equilibrium Business Cycle Model
Is Investment in Africa Too Low or Too High? Macro and Micro Evidence
By William Easterly, Shantayanan Devarajan, ...
External Shocks, Politics and Private Investment: Some Theory and Empirical Evidence
By Sule Ozler and Dani Rodrik
The Cfa Franc Zone and the Emu