IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Inflation and Growth in an Integrated Approach

  • Michael Bruno
Registered author(s):

    Macroeconomic factors in general, and the macropolicy response to common external shocks (such as oil prices and real interest rates) in particular, have in recent decades played a dominant role in countries' protracted growth crises as well as in growth renewal and its long-run sustainability. The paper attempts to construct and apply a simple framework for the joint empirical analysis of growth and inflation, starting from a rudimentary short-term AS and AD framework that is 'averaged' into the medium and long run. For the industrial countries through the 1970s and 1980s such analysis highlights the existence of a marked 20 year inflation and growth 'loop', extending beyond the conventional business cycles, with well identifiable phases of crisis entry, disinflation and partial growth recovery. The interaction of macropolicy response to shocks with structural (mainly labor market) features of economies account for differences across countries both in the depth of the deterioration phase as well as in the gradual recovery, for which a panel regression provides some of the links between inflation, economic activity, profits and investment renewal. The second part of the paper (Section IV) applies similar tools and uncovers analogous, though much more dramatic, 15-20 year loops, in the crisis and recovery of a group of countries in Latin America (as well as Israel). Likewise the strong macro path-dependence of growth in middle-income countries (with cross-country differences in structure and social cohesion) is borne out by comparisons with countries (both in the same region and outside it) that faced similar external shocks yet exhibited much milder 'loops'. The paper ends with a brief reference to some analogies with the sequencing of the cycle of growth crisis, adjustment and structural reform in Eastern Europe.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.nber.org/papers/w4422.pdf
    Download Restriction: no

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4422.

    as
    in new window

    Length:
    Date of creation: Aug 1993
    Date of revision:
    Publication status: published as With William Easterly, published as "Inflation and Growth: In Search of a Stable Relationship", FRBSL, Vol. 78, no. 3 (May/June 1996): 139-146.
    Handle: RePEc:nbr:nberwo:4422
    Note: IFM
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
    Phone: 617-868-3900
    Web page: http://www.nber.org
    Email:


    More information through EDIRC

    References listed on IDEAS
    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.:

    as in new window
    1. Stanley Fischer, 1993. "The Role of Macroeconomic Factors in Growth," NBER Working Papers 4565, National Bureau of Economic Research, Inc.
    2. Easterly, William & Rebelo, Sérgio, 1994. "Fiscal Policy and Economic Growth: An Empirical Investigation," CEPR Discussion Papers 885, C.E.P.R. Discussion Papers.
    3. Bayoumi, Tamim & Eichengreen, Barry, 1992. "Macroeconomic Adjustment Under Bretton Woods and the Post-Bretton-Woods Float: An Impulse-Response Analysis," CEPR Discussion Papers 729, C.E.P.R. Discussion Papers.
    4. Robert S. Pindyck & Andres Solimano, 1993. "Economic Instability and Aggregate Investment," NBER Working Papers 4380, National Bureau of Economic Research, Inc.
    5. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
    6. Bruno, M., 1991. "High Inflation and the Nominal Anchors of an Open Economy," Princeton Studies in International Economics 183, International Economics Section, Departement of Economics Princeton University,.
    7. Andrew Berg & Jeffrey Sachs, 1988. "The Debt Crisis: Structural Explanations of Country Performance," NBER Working Papers 2607, National Bureau of Economic Research, Inc.
    8. Avinash Dixit, 1992. "Investment and Hysteresis," Journal of Economic Perspectives, American Economic Association, vol. 6(1), pages 107-132, Winter.
    9. Dickens, William T., 1982. "The productivity crisis: Secular or cyclical?," Economics Letters, Elsevier, vol. 9(1), pages 37-42.
    10. Fernandez, Raquel & Rodrik, Dani, 1991. "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review, American Economic Association, vol. 81(5), pages 1146-55, December.
    11. William Easterly & Michael Kremer & Lant Pritchett & Lawrence H. Summers, 1993. "Good Policy or Good Luck? Country Growth Performance and Temporary Shocks," NBER Working Papers 4474, National Bureau of Economic Research, Inc.
    12. Dixit, Avinash K, 1989. "Entry and Exit Decisions under Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 620-38, June.
    13. Galor, Oded & Tsiddon, Daniel, 1992. "Transitory Productivity Shocks and Long-Run Output," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(4), pages 921-33, November.
    14. Pindyck, Robert, 1989. "Irreversibility, uncertainty, and investment," Policy Research Working Paper Series 294, The World Bank.
    15. Saint-Paul, Gilles, 1992. "Productivity Growth and the Structure of the Business Cycle," CEPR Discussion Papers 709, C.E.P.R. Discussion Papers.
    16. Dornbusch, Rudiger, 1990. "Policies to Move from Stabilization to Growth," CEPR Discussion Papers 456, C.E.P.R. Discussion Papers.
    17. Benabou, Roland, 1988. "Search, Price Setting and Inflation," Review of Economic Studies, Wiley Blackwell, vol. 55(3), pages 353-76, July.
    18. Stock, James H & Watson, Mark W, 1988. "Variable Trends in Economic Time Series," Journal of Economic Perspectives, American Economic Association, vol. 2(3), pages 147-74, Summer.
    19. Dornbusch, Rudiger & Edwards, Sebastian, 1989. "The macroeconomics of populism in Latin America," Policy Research Working Paper Series 316, The World Bank.
    20. 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.
    21. Steven Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1987. "Financing Constraints and Corporate Investment," NBER Working Papers 2387, National Bureau of Economic Research, Inc.
    22. Guido Enrico Tabellini & Torsten Persson, 1991. "Growth, Distribution and Politics," IMF Working Papers 91/78, International Monetary Fund.
    23. C Bean, 1992. "European Unemployment: A Survey," CEP Discussion Papers dp0071, Centre for Economic Performance, LSE.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:4422. 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: ()

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.