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Output, growth, welfare, and inflation: a survey

  • Joseph H. Haslag

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.

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File URL: http://www.dallasfed.org/assets/documents/research/er/1997/er9702b.pdf
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Article provided by Federal Reserve Bank of Dallas in its journal Economic and Financial Policy Review.

Volume (Year): (1997)
Issue (Month): Q II ()
Pages: 11-21

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Handle: RePEc:fip:fedder:y:1997:i:qii:p:11-21
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