Inflation and Economic Growth in Latin America: Some Panel Time-Series Evidence

In this paper we investigate the role of poor macroeconomic per- formance, in terms of high rates of inflation, in determining economic growth in four Latin American countries between 1970 and 2007. The empirical results, based on the relatively novel panel time-series analy- sis, confirm the anecdotal evidence which suggests that inflation has had a detrimental effect to growth in the region. All in all, we high- light the costs that inflation has had on economic activity, and also the importance of particular economic institutions which were imple- mented in the 1990s - central-bank independence and fiscal responsi- bilities laws- in actually keeping inflation under control in the region, as a first step in the direction of sustained growth and prosperity.