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Inflation, Volatility and Growth

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  • Ruth Judson
  • Athanasios Orphanides

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 exploiting the time dimension of the data reveals a strong negative correlation between inflation and income growth for all but 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 correlated with growth, even after the effect of the level of inflation is controlled for.

Suggested Citation

  • Ruth Judson & Athanasios Orphanides, 1999. "Inflation, Volatility and Growth," International Finance, Wiley Blackwell, vol. 2(1), pages 117-138, April.
    • Handle: RePEc:bla:intfin:v:2:y:1999:i:1:p:117-138
    DOI: 10.1111/1468-2362.00021
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