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Warning: Inflation May Be Harmful to Your Growth

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Author Info
Atish Ghosh (International Monetary Fund)
Steven Phillips (International Monetary Fund)
Abstract

While few doubt that very high inflation is bad for growth, there is less agreement about the effects of moderate inflation. Using panel regressions and allowing for a nonlinear specification, this paper finds a statistically and economically significant negative relation between inflation and growth, which holds robustly at all but the lowest inflation rates. A "decision-tree" technique identifies inflation as one of the most important determinants of growth. Finally, short-run growth costs of disinflation are only relevant for the most severe disinflations, or when the initial inflation rate is well within the single-digit range. Copyright 1998, International Monetary Fund

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Publisher Info
Article provided by Palgrave Macmillan Journals in its journal IMF Staff Papers.

Volume (Year): 45 (1998)
Issue (Month): 4 ()
Pages: 5
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Handle: RePEc:pal:imfstp:v:45:y:1998:i:4:p:5

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Related research
Keywords:

Find related papers by JEL classification:
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Robert J. Barro, 1995. "Inflation and Economic Growth," NBER Working Papers 5326, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Stanley Fischer, 1993. "The Role of Macroeconomic Factors in Growth," NBER Working Papers 4565, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Atish R. Ghosh & Holger Wolf, 1998. "Thresholds and Context Dependence in Growth," NBER Working Papers 6480, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Ball, Laurence, 1992. "Why does high inflation raise inflation uncertainty?," Journal of Monetary Economics, Elsevier, vol. 29(3), pages 371-388, June. [Downloadable!] (restricted)
  5. Sala-i-Martin, Xavier, 1997. "I Just Ran Two Million Regressions," American Economic Review, American Economic Association, vol. 87(2), pages 178-83, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. John Duffy & Maxim Nikitin, 2004. "Dollarization Traps," Econometric Society 2004 North American Summer Meetings 456, Econometric Society. [Downloadable!]
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  2. Hossain, A., 2006. "Sources of Economic Growth in Indonesia, 1966-2003," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 6(2). [Downloadable!] (restricted)
  3. Jesús Crespo Cuaresma & Maria Antoinette Silgoner, 2004. "Groth effects of inflation in Europe: How low is too low, how high is too high?," Vienna Economics Papers 0411, University of Vienna, Department of Economics. [Downloadable!]
  4. Andong Zhu & Robert Pollin, 2005. "Inflation and Economic Growth: A Cross-Country Non-linear Analysis," Working Papers wp109, Political Economy Research Institute, University of Massachusetts at Amherst. [Downloadable!]
  5. Gerardo Esquivel & Raúl Razo, 2003. "Fuentes de la inflación en México, 1989-2000: Un análisis multicausal de corrección de errores," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 18(2), pages 181-226. [Downloadable!]
  6. Hossain, A., 2005. "Granger-Causality Between Inflation, Money Growth, Currency Devaluation and Economic Growth in Indonesia, 1951-2002," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 2(3), pages 45-68. [Downloadable!]
  7. Benedikt Braumann, 2004. "High Inflation and Real Wages," IMF Staff Papers, Palgrave Macmillan Journals, vol. 51(1), pages 6. [Downloadable!] (restricted)
  8. Jess Benhabib & Mark M. Spiegel, 2006. "Moderate inflation and the deflation-depression link," Working Paper Series 2006-32, Federal Reserve Bank of San Francisco. [Downloadable!]
  9. Agustín Carstens & Alejandro Werner, 2000. "Monetary Policy and Exchange Rate Choices for Mexico," Cuadernos de Economía (Latin American Journal of Economics), Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 37(110), pages 139-175. [Downloadable!]
  10. Araujo, Eurilton & Cunha, Alexandre, 2002. "Brazilian Inflation and GDP from 1850 to 2000: An Empirical Investigation," Ibmec Working Papers wpe_26, Ibmec Working Paper, Ibmec São Paulo. [Downloadable!]
  11. Freddy Heylen & Arne Schollaert & Gerdie Everaert & Lorenzo Pozzi, 2004. "Inflation and human capital formation: theory and panel data evidence," Money Macro and Finance (MMF) Research Group Conference 2003 43, Money Macro and Finance Research Group. [Downloadable!]
    Other versions:
  12. Robert Pollin & James Heintz, 2007. "Expanding Decent Employment in Kenya: The Role of Monetary Policy, Inflation Control, and the Exchange Rate," Country Study 6, International Poverty Centre. [Downloadable!]
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