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Does Inflation Harm Economic Growth? Evidence for the OECD

  • Javier Andres
  • Ignacio Hernando

The purpose of this paper is to study the correlation among growth and inflation at the OECD level, within the framework of the so-called convergence equations, and to discuss whether this correlation withstands a number of improvements in the empirical models, which try to address the most common criticisms of this evidence. The main findings are the following: 1) the negative correlation among growth and inflation is not explained by the experience of high-inflation economies; 2) the estimated costs of inflation are still significant once country-specific effects are allowed for in the empirical model; and 3) the observed correlation cannot be dismissed on the grounds of reverse causation (from GDP to inflation).

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6062.

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Date of creation: Jun 1997
Date of revision:
Publication status: published as The Costs and Effects of Price Stability. Feldstein, Martin, ed., Chicago: The University of Chicago Press, 1999, pp. 315-341.
Handle: RePEc:nbr:nberwo:6062
Note: ME
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