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Does Inflation Affect Economic Growth? A case of Turkey and U.S

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  • Mehmet Canakci

    (TOBB-ETU Visiting Academic, Faculty of Economics and Administrative Sciences, Public Finance, Inonu University, Turkey.)

Abstract

Understanding the interaction between growth and inflation is at the top of the macroeconomic problems. Whether inflation has an impact on growth has been debated for many years in economics literature. The content of these discussions has changed depending on the period of the world economy. For this reason, indicators such as inflation, fixed capital formation, and labor force values are among the basic indicators affecting the economic growth rate of a country. Therefore, this research aims to examine the effects of inflation on economic growth in the US and Turkey. The time-series data analysis is conducted and the data is collected from the world development indicators by the World Bank. Gross domestic product is a dependent variable as a proxy of growth and development and consumer price index is an independent variable as a proxy of inflation. The data cover the period from 1990 to 2019, and the results from empirical analysis show that inflation does not have a significant effect on GDP in the long run for both countries, but is effective in the short run. The results of this study can provide an estimate of how effective the inflation factor of developed or developing countries can be.

Suggested Citation

  • Mehmet Canakci, 2021. "Does Inflation Affect Economic Growth? A case of Turkey and U.S," International Journal of Economics and Financial Issues, Econjournals, vol. 11(3), pages 45-54.
    • Handle: RePEc:eco:journ1:2021-03-6
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    References listed on IDEAS

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    Cited by:

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    More about this item

    Keywords

    Inflation; Gross Domestic Product; Cobb Douglas Production Function; ARDL;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production

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