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Inflation and growth: new evidence from a dynamic panel threshold analysis

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  • Stephanie Kremer

    ()

  • Alexander Bick

    ()

  • Dieter Nautz

    ()

Abstract

We introduce a dynamic panel threshold model to estimate inflation thresholds for long-term economic growth. Advancing on Hansen (J Econom 93:345–368, 1999 ) and Caner and Hansen (Econom Theory 20:813–843, 2004 ), our model allows the estimation of threshold effects with panel data even in case of endogenous regressors. The empirical analysis is based on a large panel-dataset including 124 countries. For industrialized countries, our results confirm the inflation targets of about 2% set by many central banks. For non-industrialized countries, we estimate that inflation rates exceeding 17% are associated with lower economic growth. Below this threshold, however, the correlation remains insignificant. Copyright Springer-Verlag 2013

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Bibliographic Info

Article provided by Springer in its journal Empirical Economics.

Volume (Year): 44 (2013)
Issue (Month): 2 (April)
Pages: 861-878

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Handle: RePEc:spr:empeco:v:44:y:2013:i:2:p:861-878

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Keywords: Inflation thresholds; Inflation and growth; Dynamicpanel threshold model; C72; C23; O40;

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