Revisiting the Growth–Inflation Nexus: A Wavelet Analysis

Bhaduri, Saumitra N.

doi:10.1111/ecno.12049

Cited by 5 publications

(4 citation statements)

References 14 publications

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“…The results of continuous wavelet transformation showed that at the lower frequencies having time dynamics of eight to sixteen months, the relationship is negative. Bhaduri (2016) revisited the growth-inflation relation for India over different time horizons based on discrete wavelet decomposition analysis using annual data from 1976 to 2007. She found a weak correlation between growth and inflation for the original series.…”

Section: Literature Reviewmentioning

confidence: 99%

Investigating the Causal Linkages among Inflation, Interest Rate, and Economic Growth in Pakistan under the Influence of COVID-19 Pandemic: A Wavelet Transformation Approach

Hayat

Ghulam

Batool

et al. 2021

JRFM

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This research is the earliest attempt to understand the impact of inflation and the interest rate on output growth in the context of Pakistan using the wavelet transformation approach. For this study, we used monthly data on inflation, the interest rate, and industrial production from January 1991 to May 2020. The COVID-19 pandemic has affected economies around the world, especially in view of the measures taken by governmental authorities regarding enforced lockdowns and social distancing. Traditional studies empirically explored the relationship between these important macroeconomic variables only for the short run and long run. Firstly, we employed the autoregressive distributed lag (ARDL) cointegration test and two causality tests (Granger causality and Toda–Yamamoto) to check the cointegration properties and causal relationship among these variables, respectively. After confirming the long-run causality from the ARDL bound test, we decomposed the time series of growth, inflation, and the interest rate into different time scales using wavelet analysis which allows us to study the relationship among variables for the very short run, medium run, long run, and very long run. The continuous wavelet transform (CWT), the cross-wavelet transform (XWT), cross-wavelet coherence (WTC), and multi-scale Granger causality tests were used to investigate the co-movement and nature of the causality between inflation and growth and the interest rate and growth. The results of the wavelet and multi-scale Granger causality tests show that the causal relationship between these variables is not the same across all time horizons; rather, it is unidirectional in the short-run and medium-run but bi-directional in the long-run. Therefore, this study suggests that the central bank should try to maintain inflation and the interest rate at a low level in the short run and medium run instead of putting too much pressure on these variables in the long-run.

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Section: Literature Reviewmentioning

confidence: 99%

Investigating the Causal Linkages among Inflation, Interest Rate, and Economic Growth in Pakistan under the Influence of COVID-19 Pandemic: A Wavelet Transformation Approach

Hayat

Ghulam

Batool

et al. 2021

JRFM

View full text Add to dashboard Cite

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“…This finding suggests that inflation rate below the threshold level is favourable to economic growth and beyond that it is detrimental to economic growth. Bhaduri (2007) analyzed the inflation and economic growth nexus from the perspective of Indian economy for the sample period 1976–2007. The empirical findings of the study show that a significant negative relationship exists between inflation and growth.…”

Section: Review Of Literaturementioning

confidence: 99%

The Recent Inflation Crisis and Long-run Economic Growth in India: An Empirical Survey of Threshold Level of Inflation

Behera

Mishra

2017

South Asian Journal of Macroeconomics and Public Finance

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This article investigates the existence of a threshold level of inflation and how any such level affects the growth of Indian economy. The article also seeks to examine the dynamic short-run and long-run relationship between inflation and economic growth in India. By employing spline regression method to estimate the threshold level of inflation and the long-run and short-run relationships, the results show a statistically significant structural break in the relationship between inflation and economic growth at 4 per cent. The study suggests that if inflation exceeds the threshold point, that is, 4 per cent, it will negatively affect economic growth. The autoregressive distributed lag (ARDL) model bound testing cointegration suggests that there are two cointegration vectors when gross domestic product and rate of interest are considered as the dependent variables. This result confirms the existence of the long-run equilibrium relationship between economic growth, inflation, exchange rate and rate of interest. From the long-run analysis, the study found that inflation is positively related to economic growth, whereas the other variables are not significant. JEL Classification: E4, E6

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“…Gokul and Hanif (2004) The empirical findings of the study suggest that the threshold level inflation in India is 6 percent beyond which inflation affects growth negatively. Bhaduri (2013) analyzed the nexus between inflation and economic growth in the context of Indian economy. The used the wavelet analysis with varying time scale decomposition suggests a strong and persistent negative relationship between growth and inflation for a short time scale.…”

Section: Quarterly Journal Of Econometrics Researchmentioning

confidence: 99%

Dynamics of Inflation, Economic Growth, Money Supply and Exchange Rate in India: Evidence from Multivariate Analysis

Behera

2016

Quarterly Journal of Econometrics Research

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Revisiting the Growth–Inflation Nexus: A Wavelet Analysis

Cited by 5 publications

References 14 publications

Investigating the Causal Linkages among Inflation, Interest Rate, and Economic Growth in Pakistan under the Influence of COVID-19 Pandemic: A Wavelet Transformation Approach

Investigating the Causal Linkages among Inflation, Interest Rate, and Economic Growth in Pakistan under the Influence of COVID-19 Pandemic: A Wavelet Transformation Approach

The Recent Inflation Crisis and Long-run Economic Growth in India: An Empirical Survey of Threshold Level of Inflation

Dynamics of Inflation, Economic Growth, Money Supply and Exchange Rate in India: Evidence from Multivariate Analysis

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