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Does High Inflation Affect Growth in the Long and Short Run?

Author

Listed:
  • João R. Faria

    () (University of Technology - Sydney - Australia)

  • Francisco Galrão Carneiro

    () (Catholic University of Brasilia - Brazil)

Abstract

This paper investigates the relationship between inflation and output in the context of an economy facing persistent high inflation. By analyzing the case of Brazil, we find that inflation does not impact real output in the long run, but that in the short run there exists a negative effect from inflation on output. These results support Sidrauski’s (1967) superneutrality of money in the long run, but cast doubt on the short run implications of the model for separable utility functions in consumption and real money balances, as exposed by Fischer (1979). The results are more likely to support a class of utility functions in which real money balances and consumption are perfect complements.

Suggested Citation

  • João R. Faria & Francisco Galrão Carneiro, 2001. "Does High Inflation Affect Growth in the Long and Short Run?," Journal of Applied Economics, Universidad del CEMA, vol. 4, pages 89-105, May.
  • Handle: RePEc:cem:jaecon:v:4:y:2001:n:1:p:89-105
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    References listed on IDEAS

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    More about this item

    Keywords

    inflation; growth; output;

    JEL classification:

    • O42 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Monetary Growth Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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