Examining the Robustness of the Inflation and Growth Relationship
AbstractUsing Bayesian Model Averaging, we examine whether inflation's effects on economic growth are robust to model uncertainty across numerous specifications. Cross-sectional data provide little evidence of a robust inflation-growth relationship, even after allowing for non-linear effects. Panel data with fixed effects suggest inflation is one of the more robust variables affecting growth, and non-linear results suggest that high inflation observations drive the results. However, this robustness is lost when estimation is carried out with instrumental variables.
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Bibliographic InfoArticle provided by Southern Economic Association in its journal Southern Economic Journal.
Volume (Year): 73 (2007)
Issue (Month): 4 (April)
Find related papers by JEL classification:
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- O42 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Monetary Growth Models
- O57 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
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- Theo S. Eicher & Alex Lenkoski & Adrian Raftery, 2009. "Bayesian Model Averaging and Endogeneity Under Model Uncertainty: An Application to Development Determinants," Working Papers UWEC-2009-19-FC, University of Washington, Department of Economics.
- Omay, Tolga & Öznur Kan, Elif, 2010. "Re-examining the threshold effects in the inflation-growth nexus with cross-sectionally dependent non-linear panel: Evidence from six industrialized economies," Economic Modelling, Elsevier, vol. 27(5), pages 996-1005, September.
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