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The Relationship Between Inflation And Economic Growth: Experiences Of Some Inflation Targeting Countries

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  • EKINCI, Ramazan

    (Department of Economics, Bakircay University, Izmir, Turkey.)

  • TUZUN,Osman

    (Department of Economics, Usak University, Usak, Turkey.)

  • CEYLAN, Fatih

    (Department of Economics, Usak University, Usak, Turkey.)

Abstract

The relationship between price stability and economic growth has gained importance as a fundamental reason for the monetary policies based on the inflation targeting regime. Nevertheless, there is no theoretical evidence as to which inflation level is considered to be high or low for economic decision-making units. Therefore, empirical findings are required to determine which inflation level is a threshold for the economic growth. The aim of this study is to examine the relationship between price stability and economic growth of the selected countries applying inflation targeting. We use threshold dynamic panel data model in order to make a comparison between inflation targeting countries. According to the findings of the study, the threshold value is 4,182% in inflation targeting countries. Below the threshold, the inflation-growth relationship is insignificant, and above the threshold, inflation affects economic growth negatively. This result shows that the inflation-economic growth relationship is nonlinear.

Suggested Citation

  • EKINCI, Ramazan & TUZUN,Osman & CEYLAN, Fatih, 2020. "The Relationship Between Inflation And Economic Growth: Experiences Of Some Inflation Targeting Countries," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 24(1), pages 6-20, March.
    • Handle: RePEc:vls:finstu:v:24:y:2020:i:1:p:6-20
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    References listed on IDEAS

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    Cited by:

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    2. Hans-Eggert Reimers & Dieter Gerdesmeier & Barbara Roffia, 2023. "Investigating the Inflation–Output Nexus for the Euro Area: Old Questions and New Results," Economies, MDPI, vol. 11(11), pages 1-15, October.
    3. 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.
    4. Askar Akaev & Alexander Zvyagintsev & Tessaleno Devezas & Askar Sarygulov & Andrea Tick, 2023. "Mathematical Models for Forecasting Unstable Economic Processes in the Eurozone," Mathematics, MDPI, vol. 11(21), pages 1-14, November.
    5. Mariusz Pyra & Agnieszka Siedlecka, 2022. "Effect of Inflation on Poland’s Economic Growthin 2021-2022," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 97-111.

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    More about this item

    Keywords

    Monetary Policy; Emerging Countries; Threshold Dynamic Panel Data Analysis;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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