The Effects of Inflation on Economic Growth: Lessons from Latin America

15 Pages Posted: 15 Feb 2006

See all articles by Jose de Gregorio

Jose de Gregorio

Central Bank of Chile; Universidad de Chile; National Bureau of Economic Research (NBER)

Date Written: October 1991


This paper investigates the relationship between inflation and long-run growth. It presents an endogenous growth model that illustrates the channels through which inflation affects growth. The model highlights the effects of inflation on the productivity of capital and the rate of capital accumulation. The reduction in growth is caused by a diversion of resources away from activities that lead to faster rates of growth toward activities associated with reducing the costs of inflation. The negative association between inflation and growth is assessed empirically for a sample group of Latin American countries.

JEL Classification: E60, O42, O54

Suggested Citation

de Gregorio, Jose, The Effects of Inflation on Economic Growth: Lessons from Latin America (October 1991). IMF Working Paper, Vol. , pp. 1-15, 1991. Available at SSRN:

Jose De Gregorio (Contact Author)

Central Bank of Chile ( email )

Agustinas 1180

Universidad de Chile ( email )

Ministry of Finance Teatinos l20 - Piso l2

National Bureau of Economic Research (NBER)

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