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Threshold Effects on the Relationship Between Inflation Rate and Economic Growth in Tunisia

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  • Thouraya Boujelbène Dammak
  • Kamel Helali

Abstract

Using an econometric technique suggested by Hansen [(2001). The new econometrics of structural change: Dating breaks in U.S. Labor productivity. Journal of Economic Perspectives, 15, 117–128], this paper studies the inflation–economic growth nexus in the case of Tunisia for the 1993-01–2012-11 period. The results show that there is one inflation threshold value that does exist for Tunisia. This evidence strongly sustains the view that the relationship between inflation rate and economic growth is non-linear. The estimated threshold regression model suggests that a threshold value of inflation rate below 3.48% fosters economic growth. In addition, above this threshold level, there is a statistically significant negative relationship between inflation rate and economic growth. These results have important implications to policy-makers who should pay attention to the inflation phenomena. Therefore, a new policy that takes into account such a threshold should be set up.

Suggested Citation

  • Thouraya Boujelbène Dammak & Kamel Helali, 2017. "Threshold Effects on the Relationship Between Inflation Rate and Economic Growth in Tunisia," International Economic Journal, Taylor & Francis Journals, vol. 31(2), pages 310-325, April.
  • Handle: RePEc:taf:intecj:v:31:y:2017:i:2:p:310-325
    DOI: 10.1080/10168737.2017.1289546
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    References listed on IDEAS

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    Cited by:

    1. Wissem Boukraine, 2020. "Inflation Dynamics in Tunisia: a Smooth Transition Autoregressive Approach," Economic Research Guardian, Weissberg Publishing, vol. 10(2), pages 122-143, December.

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