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Relationship between inflation and economic growth in Azerbaijani economy: is there any threshold effect?

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  • Hasanov, Fakhri

Abstract

The study examines possibility of threshold effect of inflation on economic growth over the period of 2000-2009. Estimated threshold model indicates that there is a non-linear relationship between economic growth and inflation in the Azerbaijani economy and threshold level of inflation for GDP growth is 13 percent. Below threshold level inflation has statistically significant positive effect on GDP growth, but this positive relationship becomes negative one when inflation exceeds 13 percent. Results of the study may be useful for monetary policymakers in terms of keeping inflation below the threshold level of 13 percent to prevent its negative effect on economic growth.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 33494.

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Date of creation: Jun 2011
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Publication status: Published in Asian Journal of Business and Management Sciences No1.1(2011): pp. 1-11
Handle: RePEc:pra:mprapa:33494

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Keywords: Azerbaijani Economy; Inflation; Economic Growth; Gross Fixed Capital Formation; Threshold Level;

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  1. Stephanie Kremer & Alexander Bick & Dieter Nautz, 2009. "Inflation and Growth: New Evidence From a Dynamic Panel Threshold Analysis," SFB 649 Discussion Papers SFB649DP2009-036, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  2. David, Drukker & Pedro, Gomis-Porqueras & Paula, Hernandez -erme, 2005. "Threshold effects in the relationship between inflation and growth: a new panel-data approach," MPRA Paper 38225, University Library of Munich, Germany.
  3. Michael Sarel, 1996. "Nonlinear Effects of Inflation on Economic Growth," IMF Staff Papers, Palgrave Macmillan, vol. 43(1), pages 199-215, March.
  4. Martin Feldstein, 1980. "Inflation, Tax Rules, and Investment: Some Econometric Evidence," NBER Working Papers 0577, National Bureau of Economic Research, Inc.
  5. Qaiser Munir & Kasim Mansur, 2009. "Non-Linearity between Inflation Rate and GDP Growth in Malaysia," Economics Bulletin, AccessEcon, vol. 29(3), pages 1555-1569.
  6. Nasir, Iqbal & Saima, Nawaz, 2010. "Investment, inflation and economic growth nexus," MPRA Paper 27163, University Library of Munich, Germany.
  7. Raphael A. Espinoza & Ananthakrishnan Prasad & H. L. Leon, 2010. "Estimating the Inflation-Growth Nexus," IMF Working Papers 10/76, International Monetary Fund.
  8. FABAYO, Joseph Ademola & AJILORE, Olubanjo Taiwo, 2006. "Inflation: How Much Is Too Much For Economic Growth in Nigeria," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 41(2), pages 129-147, December.
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