Inflation and economic growth: evidence from a growth equation

Abstract

There is little existing empirical evidence on the relationship between inflation and growth, and much of what evidence there is fails to control appropriately for growth in real inputs. The present work uses a small sample of OECD countries for which capital stock and labour force data are available to investigate, in a pooled time series and cross-section fashion, the relationship between inflation and growth. Strong evidence is found contrary to the maintained hypothesis that there should be no association between inflation and real growth. The weight of evidence is that, having appropriately controlled for capital and labour inputs, inflation and its first difference are significantly negatively related to economic growth.

Agriculture and Growth in Oceania

“…Table 4 also shows that the inflation rate (P) is statistically significant at the 5 and 10 percent levels with a negative sign on its coefficient. This outcome is consistent with previous cross-country studies (for example, Kormendi and Meguire, 1985;and Alexander, 1997). This suggests that high inflation rates are potentially disruptive to output growth in the economies of Oceania.…”

Stock Market Development and Macroeconomic Performance in Thailand

“…According to Levine and Renelt (1992), among various variables considered, the share of investment in GDP has a positive and robust relationship with economic growth. Moreover, as argued by Alexander (1997), the omission of this variable in many growth studies is not justifiable on theoretical grounds. In our context, including the investment ratio allows for the indirect relation between stock market development and economic development, i.e.…”

Inflation and Growth: Stories Short and Tall

“…One objection to many of these papers is that averaging inflation over several years may obscure useful information in the data, so that studies using annual data are preferable (Alexander, 1997). It has already been pointed out that the short-run variation in output and inflation is not very useful in identifying longlived effects.…”