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Does Inflation Harm Economic Growth? Evidence from the OECD

In: The Costs and Benefits of Price Stability

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  • Javier Andrés
  • Ignacio Hernando

Abstract

The purpose of this paper is to study the correlation among growth and inflation at the OECD level, within the framework of the so-called convergence equations, and to discuss whether this correlation withstands a number of improvements in the empirical models, which try to address the most common criticisms of this evidence. The main findings are the following: 1) the negative correlation among growth and inflation is not explained by the experience of high-inflation economies; 2) the estimated costs of inflation are still significant once country-specific effects are allowed for in the empirical model; and 3) the observed correlation cannot be dismissed on the grounds of reverse causation (from GDP to inflation).

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This chapter was published in:

  • Martin Feldstein, 1999. "The Costs and Benefits of Price Stability," NBER Books, National Bureau of Economic Research, Inc, number feld99-1, octubre-d.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 7777.

    Handle: RePEc:nbr:nberch:7777

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