Inflation-Growth Profiles Across Countries: Evidence from Developing and Developed Countries
There is growing evidence from multi-country studies indicating that there is a turning point in the relationship between inflation and economic growth beyond which the detrimental effects of high inflation offset the stimulating effects of mild inflation on growth. However, it is not clear whether it is appropriate to assume an identical turning point in the inflation and growth relation across countries at various stages of development. Using a non-linear specification and the data from four groups of countries at various stages of development, this paper examines the possibility for a family rather than a single inverted U relation across countries at various stages of development. The estimated turning points are found to vary widely from as high as 15% per year for the lower-middle-income countries to 11% for the low-income countries, and 5% for the upper-middle-income countries. No statistically detectable, long-run relationship between inflation and growth is evident for the OECD countries. The results indicate the potential bias in the estimation of inflation-growth nexus that may result from combining various countries at different levels of development. The existence of such a degree of heterogeneity across countries at various stages of development also suggests the inappropriateness of setting a single, uniform numerical policy target applicable to all (developing) countries.
Volume (Year): 18 (2004)
Issue (Month): 2 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/CIRA20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/CIRA20|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Neil R. Ericsson & John S. Irons & Ralph W. Tryon, 2000.
"Output and Inflation in the Long Run,"
Amherst Economic Papers
2000.01, Amherst College, Department of Economics, revised 24 Oct 2000.
- Stanley Fischer & Franco Modigliani, 1978.
"Towards an understanding of the real effects and costs of inflation,"
Review of World Economics (Weltwirtschaftliches Archiv),
Springer, vol. 114(4), pages 810-833, December.
- Stanley Fischer & Franco Modigliani, 1978. "Towards An Understanding of the Real Effects and Costs of Inflation," NBER Working Papers 0303, National Bureau of Economic Research, Inc.
- Mankiw, N Gregory & Romer, David & Weil, David N, 1992.
"A Contribution to the Empirics of Economic Growth,"
The Quarterly Journal of Economics,
MIT Press, vol. 107(2), pages 407-37, May.
- Robert J. Barro, 2012.
"Inflation and Economic Growth,"
CEMA Working Papers
568, China Economics and Management Academy, Central University of Finance and Economics.
- Tobin, James, 1972. "Inflation and Unemployment," American Economic Review, American Economic Association, vol. 62(1), pages 1-18, March.
- Stanley Fischer, 1993.
"The Role of Macroeconomic Factors in Growth,"
NBER Working Papers
4565, National Bureau of Economic Research, Inc.
- 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.
- Jose De Gregorio, 1991. "The Effects of Inflationon Economic Growth; Lessons From Latin America," IMF Working Papers 91/95, International Monetary Fund.
- Bernard Fingleton, 2000. "Convergence: International comparisons based on a simultaneous equation model with regional effects," International Review of Applied Economics, Taylor & Francis Journals, vol. 14(3), pages 285-305.
- Bleaney, Michael F., 1996. "Macroeconomic stability, investment and growth in developing countries," Journal of Development Economics, Elsevier, vol. 48(2), pages 461-477, March.
- Bruno, Michael & Easterly, William, 1995.
"Inflation crises and long-run growth,"
Policy Research Working Paper Series
1517, The World Bank.
- Atish R. Ghosh & Steven Phillips, 1998. "Inflation, Disinflation, and Growth," IMF Working Papers 98/68, International Monetary Fund.
- Levine, Ross & Renelt, David, 1992.
"A Sensitivity Analysis of Cross-Country Growth Regressions,"
American Economic Review,
American Economic Association, vol. 82(4), pages 942-63, September.
- Levine, Ross & Renelt, David, 1991. "A sensitivity analysis of cross-country growth regressions," Policy Research Working Paper Series 609, The World Bank.
- Moschos, Demetrios, 1989. "Export expansion, growth and the level of economic development: An empirical analysis," Journal of Development Economics, Elsevier, vol. 30(1), pages 93-102, January.
- Kormendi, Roger C. & Meguire, Philip G., 1985. "Macroeconomic determinants of growth: Cross-country evidence," Journal of Monetary Economics, Elsevier, vol. 16(2), pages 141-163, September.
- Robert M. Solow, 1994. "Perspectives on Growth Theory," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 45-54, Winter.
- Maurizio Pugno, 1993. "On Competing Theories of Economic Growth: a Cross-country Evidence," Department of Economics Working Papers 9309, Department of Economics, University of Trento, Italia.
- Pierre Fortin, 1993. "The Unbearable Lightness of Zero-Inflation Optimism," Cahiers de recherche CREFE / CREFE Working Papers 15, CREFE, Université du Québec à Montréal.
When requesting a correction, please mention this item's handle: RePEc:taf:irapec:v:18:y:2004:i:2:p:191-207. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If references are entirely missing, you can add them using this form.