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Inflation, Disinflation, and Growth
Author:
Mr. Atish R. Ghosh
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and
Mr. Steven T Phillips
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Series:
IMF Working Papers
Volume/Issue:
Volume 1998: Issue 068
Language:
English
Publication Date:
01 May 1998
DOI:
https://doi.org/10.5089/9781451961188.001
ISBN:
9781451961188
ISSN:
1018-5941
Pages:
44
Keywords:
WP; rate of inflation; GDP growth; exchange rate; terms of trade; inflation; growth determinants; growth regressions; robustness; inflation-growth relationship; inflation coefficient; inflation-growth association; Disinflation; Human capital; Agroindustries; Public expenditure review; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Although few would doubt that very high inflation is bad for growth, there is much less agreement about moderate inflation’s effects. Using panel regressions and a nonlinear specification, this paper finds a statistically and economically significant negative relationship between inflation and growth. This relationship holds at all but the lowest inflation rates and is robust across various samples and specifications. The method of binary recursive trees identifies inflation as one the most important statistical determinants of growth. Finally, while there are short-run growth costs of disinflation, these are only relevant for the most severe disinflations, or when the initial inflation rate is well within the single-digit range.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund