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Inflation Volatility, Institutions, and Economic Growth

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  • Noha Emara

Abstract

The study analyzes the effect of inflation volatility on growth in the presence of different degrees of institutional development. A nonlinear growth regression specification using a system Generalized Method of Moments (GMM) procedure on a sample of 37 countries over the period 1989–2006 is estimated. While the level of inflation was found not to have a significant effect on growth, which is in line with previous studies, inflation volatility does significantly impact growth even for countries with moderately high levels on inflation. In addition and in contrast with the results of Acemoglu et al. (2003) and Easterly (2005), the study finds that policies, particularly inflation volatility, does not act as a proxy for institutions. Improving institutions will have a statistically significant positive impact on growth which will help to reduce the negative impact of inflation volatility.

Suggested Citation

  • Noha Emara, 2012. "Inflation Volatility, Institutions, and Economic Growth," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 4(1), pages 29-53, January.
    • Handle: RePEc:sae:emeeco:v:4:y:2012:i:1:p:29-53
    DOI: 10.1177/097491011100400103
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    2. Tamilina, Larysa & Tamilina, Natalya, 2015. "The Impact of Variations in Institutional Grafting Modes on Economic Growth: A Three-Dimensional Approach," MPRA Paper 68648, University Library of Munich, Germany, revised 16 Apr 2015.
    3. Bruno Ferreira Frascaroli & Wellington Charles Lacerda Nobrega, 2019. "Inflation Targeting and Inflation Risk in Latin America," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 55(11), pages 2389-2408, September.
    4. Bogdan DIMA & Marius Sorin DINCĂ & Ştefana Maria DIMA & Gheorghiţa DINCĂ, 2017. "Does Economic Policies Uncertainty affect Economic Activity? Evidences from the United States of America," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 60-74, March.
    5. Noha Emara (a) and Loreto Reyes Rebolledo (b), 2021. "Economic Freedom and Economic Performance: Does Good Governance Matter? The Case of APAC and OECD Countries," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 46(1), pages 1-32, March.

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