IDEAS home Printed from https://ideas.repec.org/a/fip/fedfer/y1998p15-28n1.html
   My bibliography  Save this article

Growth and inflation: a cross-country study

Author

Listed:
  • Brian Motley

Abstract

This paper examines the effect of inflation on real growth in a Solow growth model using data from a cross section of countries over a 30-year period. The advantage of using a theoretical model is that it reduces the risk that the results will reflect data-mining. The results suggest that the 5 percentage point reduction in inflation from the 1970s to the 1980s would increase the growth rate of real GDP per head by between 0.1 and 0.5 percentage point. This effect would be worth between 15 percent and 140 percent of one year's income. Even the lower of these projections would be larger than most estimates of the costs of bringing inflation down.

Suggested Citation

  • Brian Motley, 1998. "Growth and inflation: a cross-country study," Economic Review, Federal Reserve Bank of San Francisco, pages 15-28.
  • Handle: RePEc:fip:fedfer:y:1998:p:15-28:n:1
    as

    Download full text from publisher

    File URL: http://www.frbsf.org/econrsrch/econrev/98-1/15-28.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Nehru, Vikram & Swanson, Eric & Dubey, Ashutosh, 1995. "A new database on human capital stock in developing and industrial countries: Sources, methodology, and results," Journal of Development Economics, Elsevier, vol. 46(2), pages 379-401, April.
    2. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 407-443.
    3. Brian Motley, 1994. "Growth and inflation: a cross-country study," Working Papers in Applied Economic Theory 94-08, Federal Reserve Bank of San Francisco.
    4. Fischer, Stanley, 1993. "The role of macroeconomic factors in growth," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 485-512, December.
    5. Laurence Ball, 1993. "How costly is disinflation? The historical evidence," Business Review, Federal Reserve Bank of Philadelphia, issue Nov, pages 17-28.
    6. K. Sato, 1966. "On the Adjustment Time in Neo-classical Growth Models," Review of Economic Studies, Oxford University Press, vol. 33(3), pages 263-268.
    7. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-963, September.
    8. Grimes, Arthur, 1991. "The effects of inflation on growth: some international evidence," MPRA Paper 68526, University Library of Munich, Germany.
    9. Judd, John P & Trehan, Bharat, 1995. "The Cyclical Behavior of Prices: Interpreting the Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(3), pages 789-797, August.
    10. Martin S. Feldstein, 1997. "The Costs and Benefits of Going from Low Inflation to Price Stability," NBER Chapters,in: Reducing Inflation: Motivation and Strategy, pages 123-166 National Bureau of Economic Research, Inc.
    11. Robert Mundell, 1963. "Inflation and Real Interest," Journal of Political Economy, University of Chicago Press, vol. 71, pages 280-280.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Burdekin, Richard C.K. & Denzau, Arthur T. & Keil, Manfred W. & Sitthiyot, Thitithep & Willett, Thomas D., 2004. "When does inflation hurt economic growth? Different nonlinearities for different economies," Journal of Macroeconomics, Elsevier, vol. 26(3), pages 519-532, September.
    2. George Bitros & Epaminondas Panas, 2006. "The inflation-productivity trade-off revisited," Journal of Productivity Analysis, Springer, vol. 26(1), pages 51-65, August.
    3. Franz R. Hahn & Peter Mooslechner, 1999. "Underpinnings of the European System of Central Banks," WIFO Monatsberichte (monthly reports), WIFO, vol. 72(1), pages 49-60, January.
    4. Bitros, G.C. & Panas, E.J., 1999. "Another Look at the Inflation-Productivity Trade-Off," DEOS Working Papers 114, Athens University of Economics and Business.
    5. Jesús Crespo Cuaresma & Maria Antoinette Silgoner, 2004. "Groth effects of inflation in Europe: How low is too low, how high is too high?," Vienna Economics Papers 0411, University of Vienna, Department of Economics.
    6. Takahiro SATO, 2017. "India in the World Economy: Inferences from Empirics of Economic Growth," ESRI Discussion paper series 338, Economic and Social Research Institute (ESRI).
    7. Shu-Hua Chen, 2015. "Fiscal and Monetary Policies in a Transactions-Based Endogenous Growth Model with Imperfect Competition," The Japanese Economic Review, Japanese Economic Association, vol. 66(1), pages 89-111, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedfer:y:1998:p:15-28:n:1. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Federal Reserve Bank of San Francisco Research Library). General contact details of provider: http://edirc.repec.org/data/frbsfus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.