Inflation, volatility and growth
This paper re-examines the relationship between inflation, inflation volatility and growth using cross-country panel data for the past 30 years. With regard to the level of inflation, we find that in contrast to current findings which are based on cross-sectional time-average regression comparisons, exploiting the time dimension of the data reveals a strong negative correlation between inflation and income growth for all but very low inflation countries. To examine the role of inflation uncertainty on growth, we use intra-year inflation data to construct an annual measure of inflation volatility. Using this measure, we find that inflation volatility is also robustly negatively correlated with growth even after the effect of the level of inflation is controlled for.
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- Clark, Todd E, 1997.
"Cross-country Evidence on Long-Run Growth and Inflation,"
Western Economic Association International, vol. 35(1), pages 70-81, January.
- Todd E. Clark, 1993. "Cross-country evidence on long run growth and inflation," Research Working Paper 93-05, Federal Reserve Bank of Kansas City.
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- 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.
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- N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 407-437.
- N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
- Fischer, Stanley, 1993. "The role of macroeconomic factors in growth," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 485-512, December.
- Stanley Fischer, 1993. "The Role of Macroeconomic Factors in Growth," NBER Working Papers 4565, National Bureau of Economic Research, Inc.
- Davis George & Kanago Bryce, 1992. "Misspecification bias in models of the effect of inflation uncertainty," Economics Letters, Elsevier, vol. 38(3), pages 325-329, March.
- Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-963, September.
- Levine, Ross & Renelt, David, 1991. "A sensitivity analysis of cross-country growth regressions," Policy Research Working Paper Series 609, The World Bank.
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