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Inflation and growth: new evidence from a dynamic panel threshold analysis

  • Kremer, Stephanie
  • Bick, Alexander
  • Nautz, Dieter

We introduce a dynamic panel threshold model to shed new light on the impact of inflation on long-term economic growth. The empirical analysis is based on a large panel-data set including 124 countries during the period from 1950 to 2004. For industrialized countries, our results confirm the inflation targets of about 2% set by many central banks. For non-industrialized countries, we estimate that inflation hampers growth if it exceeds 17%. Below this threshold, however, the impact of inflation on growth remains insignificant. Therefore, our results do not support growth-enhancing effects of inflation in developing countries.

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Paper provided by Free University Berlin, School of Business & Economics in its series Discussion Papers with number 2009/9.

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Date of creation: 2009
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Handle: RePEc:zbw:fubsbe:20099
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