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The differing consequences of low and high rates of inflation

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  • Daniel Bolton
  • W. Robert
  • J. Alexander

Abstract

Economic theory is inconclusive on the linkage between inflation and economic growth. Most existing evidence points to negative effects of inflation on growth emerging only at quite high levels of inflation. Making use of the spline regression technique, levels of inflation below 3% are found to be positively associated with growth while higher levels of inflation are negatively associated with growth. This sample consists of all countries with data of quality C or better and the data is fiveyearly averaged, with inflation being captured by a geometric average. The underlying model is the Mankiw et al. (1992) adaptation of the Solow-Swan model.

Suggested Citation

  • Daniel Bolton & W. Robert & J. Alexander, 2001. "The differing consequences of low and high rates of inflation," Applied Economics Letters, Taylor & Francis Journals, vol. 8(6), pages 411-414.
    • Handle: RePEc:taf:apeclt:v:8:y:2001:i:6:p:411-414
    DOI: 10.1080/135048501750237874
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    References listed on IDEAS

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    1. De Gregorio, Jose, 1992. "The effects of inflation on economic growth : Lessons from Latin America," European Economic Review, Elsevier, vol. 36(2-3), pages 417-425, April.
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    3. Martin Feldstein, 1983. "Inflation, Tax Rules, and Investment: Some Econometric Evidence," NBER Chapters, in: Inflation, Tax Rules, and Capital Formation, pages 243-286, National Bureau of Economic Research, Inc.
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    5. Bruno, Michael & Easterly, William, 1998. "Inflation crises and long-run growth," Journal of Monetary Economics, Elsevier, vol. 41(1), pages 3-26, February.
    6. Michael Sarel, 1996. "Nonlinear Effects of Inflation on Economic Growth," IMF Staff Papers, Palgrave Macmillan, vol. 43(1), pages 199-215, March.
    7. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 407-437.
    8. Jones, Larry E. & Manuelli, Rodolfo E., 1995. "Growth and the effects of inflation," Journal of Economic Dynamics and Control, Elsevier, vol. 19(8), pages 1405-1428, November.
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    Cited by:

    1. Christophe Rault & Alexandru Minea & Patrick Villieu, 2008. "Further theoretical and empirical evidence on money to growth relation," Economics Bulletin, AccessEcon, vol. 28(13), pages 1.
    2. repec:ebl:ecbull:v:5:y:2008:i:21:p:1-7 is not listed on IDEAS

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