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Inflation–growth nexus: evidence from a pooled CCE multiple-regime panel smooth transition model

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  • Tolga Omay

    (Atılım University)

  • Reneé Eyden

    (University of Pretoria)

  • Rangan Gupta

    (University of Pretoria)

Abstract

This paper analyses the empirical relationship between inflation and growth using a panel data estimation technique, multiple-regime panel smooth transition regression, which takes into account the nonlinearities in the data. By using a panel data set for 10 countries in the Southern African Development Community permitting us to control for unobserved heterogeneity at both country and time levels, we find that a statistically significant negative relationship exists between inflation and growth for inflation rates above the critical threshold levels of 12 and 32% which are endogenously determined. Furthermore, we remedy the cross-section dependence with the common correlated effects estimator.

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  • Tolga Omay & Reneé Eyden & Rangan Gupta, 2018. "Inflation–growth nexus: evidence from a pooled CCE multiple-regime panel smooth transition model," Empirical Economics, Springer, vol. 54(3), pages 913-944, May.
    • Handle: RePEc:spr:empeco:v:54:y:2018:i:3:d:10.1007_s00181-017-1237-2
    DOI: 10.1007/s00181-017-1237-2
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    Cited by:

    1. González, Andrés & Teräsvirta, Timo & van Dijk, Dick & Yang, Yukai, 2005. "Panel Smooth Transition Regression Models," SSE/EFI Working Paper Series in Economics and Finance 604, Stockholm School of Economics, revised 11 Oct 2017.
    2. Piñeiro-Chousa, Juan & López-Cabarcos, M. Ángeles & Šević, Aleksandar, 2022. "Green bond market and Sentiment: Is there a switching Behaviour?," Journal of Business Research, Elsevier, vol. 141(C), pages 520-527.
    3. Majid Moayyed & Mehdi Shiva, 2023. "The impact of oil price changes on industrial production: a panel smooth-transition approach on G7 countries," International Economics and Economic Policy, Springer, vol. 20(4), pages 595-612, October.
    4. Mavikela Nomahlubi & Mhaka Simba & Phiri Andrew, 2019. "The Inflation-Growth Relationship in SSA Inflation-Targeting Countries," Studia Universitatis Babeș-Bolyai Oeconomica, Sciendo, vol. 64(2), pages 84-102, August.
    5. Andrew Phiri, 2020. "Endogenous monetary approach to optimal inflation–growth nexus in Swaziland," African Journal of Economic and Management Studies, Emerald Group Publishing Limited, vol. 11(4), pages 559-571, March.
    6. Rangan Gupta & Philton Makena, 2019. "Inflation Aversion and the Growth-Inflation Relationship," Annals of Economics and Finance, Society for AEF, vol. 20(2), pages 803-815, November.
    7. Li, Wenying & Dorfman, Jeffrey H., 2019. "The implications of heterogeneous habit in consumer beverage purchases on soda and sin taxes," Food Policy, Elsevier, vol. 84(C), pages 111-120.
    8. Mohammed Akter Hossain & Hakan Acet & Zobayer Ahmed & Alauddin Majumder, 2021. "Revisiting inflation and growth nexus in Bangladesh: an asymmetric cointegration based on non-linear ARDL approach," Revista Finanzas y Politica Economica, Universidad Católica de Colombia, vol. 13(2), August.

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    More about this item

    Keywords

    Inflation; Growth; Threshold effects; Multiple-regime panel smooth transition regression model; Cross-section dependence; Common correlated effects;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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