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Politics, Inflation, and the Mundell-Tobin Effect

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  • Jeffrey Edwards

    (North Carolina A&T University)

Abstract

This paper addresses the possibility of a correlation between inflation and investment for countries with inflation below 20%. The existing literature typically finds no correlation below this level of inflation. By instrumenting with an extensive set of political stability and regime variables, I have shown that within a lower range of inflation rates, between 5% and 9%, this correlation is positive, highly significant, and shows no signs of reverse causality.

Suggested Citation

  • Jeffrey Edwards, 2006. "Politics, Inflation, and the Mundell-Tobin Effect," Journal of Economic Insight, Missouri Valley Economic Association, vol. 32(2), pages 9-30.
    • Handle: RePEc:mve:journl:v:32:y:2006:i:2:p:9-30
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    References listed on IDEAS

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    1. David Romer, 1993. "Openness and Inflation: Theory and Evidence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(4), pages 869-903.
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    More about this item

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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