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Inflation, Inflation Uncertainty and Economic Growth in Tunisia: Nonlinear Modelling Framework

Author

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  • Boujelbène Thouraya

    (University of Sfax, Sfax, Tunisia)

  • Jedidia Khoutem Ben

    (University of Manouba, University of Zitouna, Tunisia)

Abstract

Inflation uncertainty is a critical factor influencing not only the market mechanisms but also the economic activity efficiency. In this paper, we investigated the relationship between inflation and growth to capture the impact of inflation uncertainty in Tunisia. The study relied on a dataset covering the period 1984.01-2018.08 and was characterized by a nonlinear specification. We used Hansen’s (2001) Threshold Regression (TR) analysis to determine one threshold effect of inflation on growth while explaining the role of inflation uncertainty in the whole process. This study concluded that an optimal inflation rate does exist. Under this rate, a little rise in inflation may enhance economic growth, allowing an adverse impact of inflation uncertainty. Above the critical threshold of 3%, it was revealed that inflation and inflation uncertainty play opposite roles: while the former harms growth, the latter benefits it. Thus, we cannot sustain the Friedman-Ball hypothesis for the two regimes. To the best of the authors’ knowledge, this is the first study that aimed to investigate the simultaneous effects of inflation and inflation uncertainty on growth in Tunisia using a non-linear methodology. This study aims to fulfil the knowledge gap of such studies for developing countries.

Suggested Citation

  • Boujelbène Thouraya & Jedidia Khoutem Ben, 2025. "Inflation, Inflation Uncertainty and Economic Growth in Tunisia: Nonlinear Modelling Framework," Naše gospodarstvo/Our economy, Sciendo, vol. 71(2), pages 44-57.
    • Handle: RePEc:vrs:ngooec:v:71:y:2025:i:2:p:44-57:n:1005
    DOI: 10.2478/ngoe-2025-0011
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    References listed on IDEAS

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    1. Kevin B. Grier & Ólan T. Henry & Nilss Olekalns & Kalvinder Shields, 2004. "The asymmetric effects of uncertainty on inflation and output growth," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(5), pages 551-565.
    2. Arthur M. Okun, 1971. "The Mirage of Steady Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 2(2), pages 485-498.
    3. Ben Jedidia, Khoutem & Boujelbène, Thouraya & Helali, Kamel, 2014. "Financial development and economic growth: New evidence from Tunisia," Journal of Policy Modeling, Elsevier, vol. 36(5), pages 883-898.
    4. D. Hodge, 2006. "Inflation and growth in South Africa," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 30(2), pages 163-180, March.
    5. Ungar, Meyer & Zilberfarb, Ben-Zion, 1993. "Inflation and Its Unpredictability--Theory and Empirical Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(4), pages 709-720, November.
    6. Khalifa H. Ghali, 1999. "Financial Development and Economic Growth: The Tunisian Experience," Review of Development Economics, Wiley Blackwell, vol. 3(3), pages 310-322, October.
    7. repec:bla:rdevec:v:3:y:1999:i:3:p:310-22 is not listed on IDEAS
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    More about this item

    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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