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Output, growth, welfare, and inflation: a survey

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  • Joseph H. Haslag

Abstract

In this article, Joseph Haslag surveys both the theoretical results and the empirical evidence relating inflation to per capita real GDP growth. Theory yields mixed results: a permanent change in inflation can raise, lower, or have no impact on per capita output or its rate of growth. The crucial factor seems to be the role money plays in the model economy. However, in most cases, a permanent increase in inflation lowers the average person's welfare. The empirical evidence is similarly inconclusive. A body of evidence suggests that high-inflation countries do grow more slowly than low-inflation countries. However, the systematic relationship between inflation and output growth does not survive when researchers include other potential determinants of growth or adopt an alternative definition of trend.

Suggested Citation

  • Joseph H. Haslag, 1997. "Output, growth, welfare, and inflation: a survey," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q II, pages 11-21.
  • Handle: RePEc:fip:fedder:y:1997:i:qii:p:11-21
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    File URL: http://www.dallasfed.org/assets/documents/research/er/1997/er9702b.pdf
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    References listed on IDEAS

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    Cited by:

    1. Christie Smith, 2004. "The long-run effects of monetary policy on output growth," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 67, September.
    2. Yong Suk Lee, 2012. "Educational Tracking, Residential Sorting, and Intergenerational Mobility," Department of Economics Working Papers 2012-06, Department of Economics, Williams College.
    3. Ashraf, Quamrul & Gershman, Boris & Howitt, Peter, 2016. "How Inflation Affects Macroeconomic Performance: An Agent-Based Computational Investigation," Macroeconomic Dynamics, Cambridge University Press, vol. 20(02), pages 558-581, March.
    4. Grier, Robin & Grier, Kevin B., 2006. "On the real effects of inflation and inflation uncertainty in Mexico," Journal of Development Economics, Elsevier, vol. 80(2), pages 478-500, August.
    5. Patchnart Rouangsang & Chaiwat Nimanussornkul, 2012. "Relationship between inflation rate and economic growth rate of Southeast Asian countries," The Empirical Econometrics and Quantitative Economics Letters, Faculty of Economics, Chiang Mai University, vol. 1(3), pages 65-76, September.
    6. Zhou, Ge, 2011. "Money and Long-run Growth," MPRA Paper 33765, University Library of Munich, Germany.
    7. Said Zamin Shah & Said Zamin Shah & Ahmad Zubaidi Baharumshah & Muzafar Shah Habibullah & Law Siong Hook, 2017. "The Asymmetric Effects of Real and Nominal Uncertainty on Inflation and Output Growth: Empirical Evidence from Bangladesh," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 377-386.
    8. Raimundo Soto & Bassem Kamar, 2015. "Monetary Policy and Economic Performance in Resource Dependent Economies," Documentos de Trabajo 462, Instituto de Economia. Pontificia Universidad Católica de Chile..
    9. Hendrickson, Joshua R. & Salter, Alexander William, 2016. "Money, liquidity, and the structure of production," Journal of Economic Dynamics and Control, Elsevier, vol. 73(C), pages 314-328.
    10. Ramírez Rondán, Nelson & Aquino, Juan Carlos, 2006. "Crisis de inflación y productividad total de los factores en Latinoamérica," Revista Estudios Económicos, Banco Central de Reserva del Perú, issue 13.

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    Keywords

    Inflation (Finance) ; Welfare;

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