Nonlinear Effects of Inflationon Economic Growth

June 1, 1995

Preview Citation

Format: Chicago

Michael Sarel. Nonlinear Effects of Inflationon Economic Growth, (USA: International Monetary Fund, 1995) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines the possibility of nonlinear effects of inflation on economic growth. It finds evidence of a significant structural break in the function that relates economic growth to inflation. The break is estimated to occur when the inflation rate is 8 percent. Below that rate, inflation does not have any effect on growth, or it may even have a slightly positive effect. When the inflation rate is above 8 percent, however, the estimated effect of inflation on growth rates is significant, robust and extremely powerful. The paper also demonstrates that when the existence of the structural break is ignored, the estimated effect of inflation on growth is biased by a factor of three.

Subject: Inflation, International trade, Prices, Terms of trade

Keywords: Effect of inflation, Growth rate, Inflation, Inflation coefficient, Inflation effect, Inflation group, Inflation spectrum, Rate of inflation, Terms of trade, Terms of trade data, WP

Publication Details

Pages:

26
Volume:

---
DOI:

---
Issue:

---
Series:

Working Paper No. 1995/056
Stock No:

WPIEA0561995
ISBN:

9781451968316
ISSN:

1018-5941

Notes

Also published in Staff Papers, Vol. 43, No. 1, March 1996.

FACTSHEETS

RESOURCES

TOPICS

Flagship Publications

Other Publications

IMF reports and publications by country

Regional Offices

All News

See Also

For Journalists

Press Center

RESOURCES

FLAGSHIPS

KEY SERIES

IMF NOTES

IMF Working Papers