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The Inflation-Growth Nexus: A Dynamic Panel Threshold Analysis For D-8 Countries

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  • Celil AYDIN

    (Bandırma Onyedi Eylül University, Turkey, 10200.)

Abstract

This study investigates the influence of inflation on economic growth in period 1971-2014 for the Organization of Islamic Cooperation (D-8 Countries: Bangladesh, Egypt, Indonesia, Iran, Malaysia, Nigeria, Pakistan and Turkey) through dynamic panel data analysis based on threshold. Results show the existence of a non-linear relationship between economic growth rate and inflation. They indicate that the threshold for the influence of inflation on economic growth is 12.88%, and an inflation rate exceeding this threshold level negatively influences economic growth whereas an inflation rate under this threshold positively influences economic growth. These results show that a high inflation rate will have a considerable influence on economic growth. In this respect, it is crucial to ensure sustainable growth, which plays a significant part in increasing the efficiency of the monetary policies implemented and assuring stability. Hence, while determining the target inflation rate in their attempts to deal with inflation, political and economic decision-makers in these economies should not disregard the concept of threshold within the framework of monetary policy.

Suggested Citation

  • Celil AYDIN, 2017. "The Inflation-Growth Nexus: A Dynamic Panel Threshold Analysis For D-8 Countries," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 134-151, December.
    • Handle: RePEc:rjr:romjef:v::y:2017:i:4:p:134-151
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    References listed on IDEAS

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    2. Mohammed Akter Hossain & Hakan Acet & Zobayer Ahmed & Alauddin Majumder, 2021. "Revisiting inflation and growth nexus in Bangladesh: an asymmetric cointegration based on non-linear ARDL approach," Revista Finanzas y Politica Economica, Universidad Católica de Colombia, vol. 13(2), August.
    3. Ijaz Uddin & Khalil Ur Rahman, 2023. "Impact of corruption, unemployment and inflation on economic growth evidence from developing countries," Quality & Quantity: International Journal of Methodology, Springer, vol. 57(3), pages 2759-2779, June.
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    More about this item

    Keywords

    dynamic panel threshold; inflation; economic growth; D-8 countries;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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