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Inflation and economic growth: a multi-country empirical analysis

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Author Info

  • Satya Paul
  • Colm Kearney
  • Kabir Chowdhury

Abstract

The world eocnomy is currently adjusting to a low inflation regime which has implicastions for the cross-country distribution of world growth opportunities. In contrast to previous related work which assumes unidirectional causality, this paper uses the Granger methodology to examine both the direction and pattern of causality between inflation and economic growth in 70 countries using annual data over the period 1960-89. Among the conclusions are that first, the relationship between inflation and growth is non-uniform across countries: 40% of countries studied reveal no causality, one-third exhibit unidirectional causality and about one-fifth of countries show bidirectional causality, second, a vast majority of countries which show either uni- or bi-directional causality beong to the industrial group, and third, the low world inflation regime will on balance redistribute real growth opportunities benefit away from the developing countries towards the industrialized countries.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 29 (1997)
Issue (Month): 10 ()
Pages: 1387-1401

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Handle: RePEc:taf:applec:v:29:y:1997:i:10:p:1387-1401

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References

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  1. Kang, Heejoon, 1985. "The Effects of Detrending in Granger Causality Tests," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(4), pages 344-49, October.
  2. David E. Laidler, 1988. "Taking Money Seriously," Canadian Journal of Economics, Canadian Economics Association, vol. 21(4), pages 687-713, November.
  3. Kormendi, Roger C. & Meguire, Philip G., 1985. "Macroeconomic determinants of growth: Cross-country evidence," Journal of Monetary Economics, Elsevier, vol. 16(2), pages 141-163, September.
  4. Godfrey, Leslie G, 1978. "Testing for Higher Order Serial Correlation in Regression Equations When the Regressors Include Lagged Dependent Variables," Econometrica, Econometric Society, vol. 46(6), pages 1303-10, November.
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Cited by:
  1. Alexandru Minea & Patrick Villieu & Christophe Rault, 2008. "Further theoretical and empirical evidence on money to growth relation," Economics Bulletin, AccessEcon, vol. 5(21), pages 1-7.
  2. Le Viet Trung & Nguyen Thi Thuy Vinh, 2011. "The impact of oil prices, real effective exchange rate and inflation on economic activity: Novel evidence for Vietnam," Discussion Paper Series DP2011-09, Research Institute for Economics & Business Administration, Kobe University.
  3. Saaed, A.A.J., 2007. "Inflation and Economic Growth in Kuwait: 1985-2005. Evidence from Co-Integration and Error Correction Model," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 7(1).
  4. repec:ebl:ecbull:v:5:y:2008:i:21:p:1-7 is not listed on IDEAS
  5. Athanasios Koulakiotis & Katerina Lyroudi & Nicholas Papasyriopoulos, 2012. "Inflation, GDP and Causality for European Countries," International Advances in Economic Research, Springer, vol. 18(1), pages 53-62, February.
  6. Kevin S. Nell, 2000. "Is Low Inflation a Precondition for Faster Growth? The Case of South Africa," Studies in Economics 0011, Department of Economics, University of Kent.
  7. Dholakia, Ravindra H., . "Sacrifice Ratio and Cost of Inflation for the Indian Economy," IIMA Working Papers WP2014-02-04, Indian Institute of Management Ahmedabad, Research and Publication Department.
  8. M., Azali & Wong, K. S. Kelly & Lee, C. & Shafinaz, Ahmad Nazar, 2007. "The Asean-5 Future Currency: Maastricht Criteria," MPRA Paper 10272, University Library of Munich, Germany.

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