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Does High Inflation Affect Growth in the Long and Short Run?

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  • João R. Faria

    ()
    (University of Technology - Sydney - Australia)

  • Francisco Galrão Carneiro

    ()
    (Catholic University of Brasilia - Brazil)

Abstract

This paper investigates the relationship between inflation and output in the context of an economy facing persistent high inflation. By analyzing the case of Brazil, we find that inflation does not impact real output in the long run, but that in the short run there exists a negative effect from inflation on output. These results support Sidrauski’s (1967) superneutrality of money in the long run, but cast doubt on the short run implications of the model for separable utility functions in consumption and real money balances, as exposed by Fischer (1979). The results are more likely to support a class of utility functions in which real money balances and consumption are perfect complements.

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Bibliographic Info

Article provided by Universidad del CEMA in its journal Journal of Applied Economics.

Volume (Year): IV (2001)
Issue (Month): (May)
Pages: 89-105

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Handle: RePEc:cem:jaecon:v:4:y:2001:n:1:p:89-105

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Keywords: inflation; growth; output;

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References

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Citations

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Cited by:
  1. Tobias Basse & Sebastian Reddemann, 2011. "Inflation and the dividend policy of US firms," Managerial Finance, Emerald Group Publishing, Emerald Group Publishing, vol. 37(1), pages 34-46, January.
  2. Ahortor, Christian R.K. & Adenutsi, Deodat E., 2009. "Inflation, capital accumulation and economic growth in import-dependent developing countries," MPRA Paper 29353, University Library of Munich, Germany, revised 2010.
  3. Nasir, Iqbal & Saima, Nawaz, 2010. "Investment, inflation and economic growth nexus," MPRA Paper 27163, University Library of Munich, Germany.
  4. Javier Cossío Medinacelli & Marco Antonio Laguna Vargas & Dennise Martin Alarcón & Pablo Mendieta Ossio & Raúl Mendoza Patiño & Martín Palmero Pantoja & Hugo Rodríguez Gonzales, 2008. "La inflación y políticas del Banco Central de Bolivia," Revista de Análisis del BCB, Banco Central de Bolivia, Banco Central de Bolivia, vol. 10(1), pages 73-109, December.
  5. Faria, Joao Ricardo, 2001. "Markup, indexation and inflation: a bargaining approach," Economic Modelling, Elsevier, Elsevier, vol. 18(2), pages 313-323, April.
  6. David, Drukker & Pedro, Gomis-Porqueras & Paula, Hernandez -erme, 2005. "Threshold effects in the relationship between inflation and growth: a new panel-data approach," MPRA Paper 38225, University Library of Munich, Germany.
  7. repec:asi:ajoerj:2013:p:363-380 is not listed on IDEAS
  8. Temitope L.A. Leshoro, 2012. "Estimating the inflation threshold for South Africa," Working Papers, Economic Research Southern Africa 285, Economic Research Southern Africa.
  9. Yu Hsing, 2003. "Impact of external debt and other macroeconomic policies on output in Brazil: a var approach," Revista de Analisis Economico – Economic Analysis Review, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines, vol. 18(2), pages 97-108, December.
  10. Combey, Adama & Nubukpo, Kako, 2010. "Effets Non Linéaires de l'Inflation sur la Croissance dans l'UEMOA
    [Nonlinear Effects of Inflation on Growth in the WAEMU]
    ," MPRA Paper 23542, University Library of Munich, Germany.
  11. Cuma BOZKURT, 2014. "Money, Inflation and Growth Relationship: The Turkish Case," International Journal of Economics and Financial Issues, Econjournals, Econjournals, vol. 4(2), pages 309-322.
  12. Jalil, Abdul & Mahmood, Tahir & Idrees, Muhammad, 2013. "Tourism–growth nexus in Pakistan: Evidence from ARDL bounds tests," Economic Modelling, Elsevier, Elsevier, vol. 35(C), pages 185-191.
  13. Shamim Ahmed & M. Golam Mortaza, 2010. "Inflation and Economic Growth in Bangladesh: 1981-2005," Working Papers id:3033, eSocialSciences.
  14. Kafayat Amusa & Rangan Gupta & Shaakira Karolia & Beatrice D. Simo Kengne, 2010. "The Long-Run Impact of Inflation in South Africa," Working Papers, University of Pretoria, Department of Economics 201029, University of Pretoria, Department of Economics.
  15. Saaed, A.A.J., 2007. "Inflation and Economic Growth in Kuwait: 1985-2005. Evidence from Co-Integration and Error Correction Model," Applied Econometrics and International Development, Euro-American Association of Economic Development, Euro-American Association of Economic Development, vol. 7(1).
  16. JoaoRicardo Faria & Francisco Galrao Caneiro, 2003. "Devalution, Output and Wages," International Economic Journal, Taylor & Francis Journals, Taylor & Francis Journals, vol. 17(4), pages 15-27.
  17. Cuestas, Juan Carlos & Harrison, Barry, 2010. "Inflation persistence and nonlinearities in Central and Eastern European countries," Economics Letters, Elsevier, Elsevier, vol. 106(2), pages 81-83, February.

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