On the nonlinear relationship between inflation and economic growth

Eggoh, Jude; Khan, Muhammad

doi:10.1016/j.rie.2014.01.001

Cited by 117 publications

(91 citation statements)

References 32 publications

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“…Empirical evidence for the relationship involved in the inflation-growth nexus showed that inflation has a negative effect on economic growth. Eggoh and Khan's (2014) empirical results validated the inflation-growth nexus. Rousseau and Wachtel (2002) investigated the relationship between the financial sector and economic growth in connection with the inflation rate.…”

Section: Inflation-growth Nexusmentioning

confidence: 63%

Does financial depth impact economic growth in North Cyprus?

Türsoy

Faisal

2018

Financ Innov

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This study purpose is to connect the proxy of financial development which is total banking sector's deposits with the economic growth in North Cyprus. The reason for using the total deposit differently with the existing literature is because North Cyprus is bank-based financial system. Therefore, this study provides an analysis of the connection between finance-growth nexus in North Cyprus from 1978 through 2015, using the autoregressive distributed lag (ARDL) model and combined cointegration to evaluate and verify the relationship. In addition, this research added the inflation rate to the model specification to investigate the inflation-growth interaction. The results revealed that both methods of cointegration provided robust evidence for a long-run relationship between financial debt and growth. The ARDL long-run and short-run coefficients showed the positive impact of depth and the negative impact of inflation on economic growth, thereby confirming the strength of the financegrowth and inflation-growth connections. Moreover, financial depth had a larger coefficient than the inflation rate. Finally, the VECM Granger causality test provided evidence for unidirectional causality from the total deposits and inflation rate to economic growth in North Cyprus. These results are significant for the policymakers of North Cyprus because the findings show that economic growth can be improved by enhancing the deposit rates in the financial system.

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Section: Inflation-growth Nexusmentioning

confidence: 63%

Does financial depth impact economic growth in North Cyprus?

Türsoy

Faisal

2018

Financ Innov

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“…A vast majority of the earlier empirical literature based their empirical estimates on panels consisting of both developing and developed economies (Fischer (1993), Barro (1995), Bruno andEasterly (1998), Sarel (1996), Ghosh and Phillips (1998) and Kahn and Senhadji (2001), Drukker et al (2005), Hineline (2007), Kremer et. (2009), Vaona (2012, Vinayagathasan (2013), Seleteng et al (2013), Eggoh and Kahn (2014), Ibarra and Trupkin (2016) and Ndoricimpa (2017)). Notably these studies advocate for a negative effect of inflation on economic growth in both developed and developing economies, although inflation was deemed to have a stronger adverse effect in industrialized economies.…”

Section: Literature Reviewmentioning

confidence: 99%

Inflation-Growth Nexus in Botswana: Can Lower Inflation Really Spur Growth in the Country?

Mothuti

Phiri

2018

Glob. Econ. J.

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Does inflation affect economic growth in Botswana over the short-run and longrun? In applying bounds procedure for modelling ARDL cointegation effects applied to empirical data collected between 1975 and 2016 we find that this hypothesis does not hold true for Botswana as inflation is found to be insignificantly related with economic growth over both the short and long-run. Our growth equation estimates point to exports (positive), government size (negative) and an Pula/Dollar exchange rate (negative) as being significantly correlated with steady-state GDP growth. Further empirical exercises show that an appreciated Pula/dollar exchange rate increases inflation whilst bearing no effect on economic growth. Conversely, a depreciated Pula/Dollar exchange simultaneously decreases inflation and economic growth for the Botswana economy. Policymakers should be this aware that attainment of lower inflation rates which occurs through a depreciated Pula/Dollar currency will only retard economic growth.

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“…The marginal effect of inflation on growth is stronger when the level is at lower rates (Ghosh and Philips 1998) The inflation-growth relationship can also be affected by other macroeconomic variables (e.g., trade openness, and degree of financial development, and public expenditure). For example, Eggoh and Khan (2014) observed that macroeconomic factors like trade openness with an excess demand gap can lower the cyclical movement of inflation and output growth in a competitive economy.…”

Section: Introductionmentioning

confidence: 99%

Inflation and Economic Growth: a Review of The International Literature

Akinsola

Odhiambo²

2017

CER

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This paper surveys the existing literature on the relationship between inflation and economic growth in developed and developing countries, highlighting the theoretical and empirical indications. The study finds that the impact of inflation on economic growth varies from country to country and over time. The study also finds that the results from these studies depend on country‑specific characteristics, the data set used, and the methodology employed. On balance, the study finds overwhelming support in favour of a negative relationship between inflation and growth, especially in developed economies. However, there is still much controversy about the specific threshold level of inflation that is appropriate for growth. Most previous studies on this subject just assume a unidirectional causal relationsship between inflation and economic growth. To our knowledge, this may be the first review of its kind to survey, in detail, the existing research on the relationship between inflation and economic growth in developed and developing countries.

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On the nonlinear relationship between inflation and economic growth

Cited by 117 publications

References 32 publications

Does financial depth impact economic growth in North Cyprus?

Does financial depth impact economic growth in North Cyprus?

Inflation-Growth Nexus in Botswana: Can Lower Inflation Really Spur Growth in the Country?

Inflation and Economic Growth: a Review of The International Literature

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