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The Effects of Inflationon Economic Growth; Lessons From Latin America

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  • Jose De Gregorio

Abstract

This paper investigates the relationship between inflation and long-run growth. It presents an endogenous growth model that illustrates the channels through which inflation affects growth. The model highlights the effects of inflation on the productivity of capital and the rate of capital accumulation. The reduction in growth is caused by a diversion of resources away from activities that lead to faster rates of growth toward activities associated with reducing the costs of inflation. The negative association between inflation and growth is assessed empirically for a sample group of Latin American countries.

Suggested Citation

  • Jose De Gregorio, 1991. "The Effects of Inflationon Economic Growth; Lessons From Latin America," IMF Working Papers 91/95, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:91/95
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    1. Oriol Aspachs-Bracons & Pau Rabanal, 2010. "The drivers of housing cycles in Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 1(1), pages 101-130, March.
    2. Darracq Pari├Ęs, Matthieu & Notarpietro, Alessandro, 2008. "Monetary policy and housing prices in an estimated DSGE for the US and the euro area," Working Paper Series 972, European Central Bank.
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