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Inflation and economic growth: evidence from a growth equation

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  • W. Robert
  • J. Alexander

Abstract

There is little existing empirical evidence on the relationship between inflation and growth, and much of what evidence there is fails to control appropriately for growth in real inputs. The present work uses a small sample of OECD countries for which capital stock and labour force data are available to investigate, in a pooled time series and cross-section fashion, the relationship between inflation and growth. Strong evidence is found contrary to the maintained hypothesis that there should be no association between inflation and real growth. The weight of evidence is that, having appropriately controlled for capital and labour inputs, inflation and its first difference are significantly negatively related to economic growth.

Suggested Citation

  • W. Robert & J. Alexander, 1997. "Inflation and economic growth: evidence from a growth equation," Applied Economics, Taylor & Francis Journals, vol. 29(2), pages 233-238.
    • Handle: RePEc:taf:applec:v:29:y:1997:i:2:p:233-238
    DOI: 10.1080/000368497327290
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    2. Marcelo Ochoa & Walter Orellana Rocha, 2002. "Una aproximación no lineal a la relación inflación - crecimiento económico: Un estudio para América Latina," Revista de Análisis del BCB, Banco Central de Bolivia, vol. 5(2), pages 87-126, December.
    3. Christophe Rault & Alexandru Minea & Patrick Villieu, 2008. "Further theoretical and empirical evidence on money to growth relation," Economics Bulletin, AccessEcon, vol. 28(13), pages 1.
    4. Kiliç, Cuneyt & Arica, Feyza, 2014. "Economic Freedom, Inflation Rate and their Impact on Economic Growth: A Panel Data Analysis," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 160-176, March.
    5. Samir Ghazouani, 2012. "Threshold Effect of Inflation on Growth: Evidence from MENA Region," Working Papers 715, Economic Research Forum, revised 2012.
    6. Andrea Bassanini & Stefano Scarpetta, 2003. "The Driving Forces of Economic Growth: Panel Data Evidence for the OECD Countries," OECD Economic Studies, OECD Publishing, vol. 2001(2), pages 9-56.
    7. Vagenas, George & Vlachokyriakou, Eleni, 2012. "Olympic medals and demo-economic factors: Novel predictors, the ex-host effect, the exact role of team size, and the “population-GDP” model revisited," Sport Management Review, Elsevier, vol. 15(2), pages 211-217.
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    9. Sehati , Elham & Mousavi Jahromi , Yeganeh & Mehrara , Mohsen & Najafizadeh , Abbas, 2018. "Non-Linear Inflationary Dynamics based on the Concept of Missing Money in Iran," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 13(2), pages 221-243, April.
    10. Rasha Istaiteyeh & Farah Najem, 2023. "GDP and Inflation: New Story from a Developing World: Case of Jordan," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 13(6), pages 1-2.
    11. Kar Muhsin & Peker Osman & Kaplan Muhittin, 2008. "Trade Liberalization, Financial Development and Economic Growth in The Long Term: The Case of Turkey," South East European Journal of Economics and Business, Sciendo, vol. 3(2), pages 25-38, November.
    12. Klump, Rainer, 2003. "Inflation, factor substitution and growth," Working Paper Series 280, European Central Bank.
    13. Adam Fforde, 2005. "Persuasion: Reflections on economics, data, and the 'homogeneity assumption'," Journal of Economic Methodology, Taylor & Francis Journals, vol. 12(1), pages 63-91.
    14. Theo Eicher & Oliver Röhn, 2007. "Institutional Determinants of Economic Performance in OECD Countries – An Institutions Climate Index," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 5(1), pages 38-49, 05.

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