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Inflation and Growth: Some Theory and Evidence

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Author Info

  • Max Gillman

    (Central European University, Department of Economics)

  • Mark Harris

    (Melbourne Institute of Applied Economic and Social Research, the University of Melbourne)

  • László Mátyás

    (Central European University, Department of Economics)

Abstract

The paper presents a monetary model of endogenous growth and specifies an econometric model consistent with it. The economic model suggests a negative inflation-growth effect, and one that is stronger at lower levels of inflation. Empirical evaluation of the model is based on a large panel of OECD and APEC member countries over the years 1961-1997. The hypothesized negative inflation effect is found comprehensively for the OECD countries to be significant and, as in the theory, to increase marginally as the inflation rate falls. For APEC countries, the results from using instrumental variables also show significant evidence of a similar behavior.

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Bibliographic Info

Paper provided by International Conferences on Panel Data in its series 10th International Conference on Panel Data, Berlin, July 5-6, 2002 with number D5-1.

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Date of creation: Mar 2002
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Handle: RePEc:cpd:pd2002:d5-1

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Keywords: Endogenous Growth; Panel Data; Inflation; Non-linearity;

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References

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  1. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
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  7. Stanley Fischer, 1993. "The Role of Macroeconomic Factors in Growth," NBER Working Papers 4565, National Bureau of Economic Research, Inc.
  8. Casey B. Mulligan & Xavier Sala-i-Martin, 2000. "Extensive Margins and the Demand for Money at Low Interest Rates," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 961-991, October.
  9. Robert E. Lucas, Jr., 2000. "Inflation and Welfare," Econometrica, Econometric Society, vol. 68(2), pages 247-274, March.
  10. Paul Gomme, 1991. "Money and growth revisited," Discussion Paper / Institute for Empirical Macroeconomics 55, Federal Reserve Bank of Minneapolis.
  11. Peter N. Ireland, 1998. "Does the Time-Consistency Problem Explain the Behavior of Inflation in the United States?," Boston College Working Papers in Economics 415, Boston College Department of Economics.
  12. Max Gillman & Anton Nakov, 2003. "A Revised Tobin Effect from Inflation: Relative Input Price and Capital Ratio Realignments, USA and UK, 1959-1999," Economica, London School of Economics and Political Science, vol. 70(279), pages 439-450, 08.
  13. Ireland, Peter N, 1994. "Money and Growth: An Alternative Approach," American Economic Review, American Economic Association, vol. 84(1), pages 47-65, March.
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  17. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  18. Stockman, Alan C., 1981. "Anticipated inflation and the capital stock in a cash in-advance economy," Journal of Monetary Economics, Elsevier, vol. 8(3), pages 387-393.
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Citations

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Cited by:
  1. 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.
  2. Charemza, Wojciech & Makarova, Svetlana, 2009. "Nonlinear Inflationary Persistence and Growth: Theory and Empirical Comparative Analysis," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 6(2), pages 5-22, June.
  3. Phiri, Andrew, 2013. "Inflation and Economic Growth in Zambia: A Threshold Autoregressive (TAR) Econometric Approach," MPRA Paper 52093, University Library of Munich, Germany.
  4. Anneli Kaasa, 2005. "Factors Of Income Inequality And Their Influence Mechanisms: A Theoretical Overview," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 40, Faculty of Economics and Business Administration, University of Tartu (Estonia).
  5. Polterovich, Victor, 2006. "Снижение Инфляции Не Должно Быть Главной Целью Экономической Политики Правительства России
    [Decreasing Inflation Shou
    ," MPRA Paper 22064, University Library of Munich, Germany.

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