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Non-linear relationship between inflation and growth in deve countries Das, Anupam.

By: Das, Anupam

Material type: Article

ArticlePublisher: 2015Description: 59 - 64 In: Economic and Political WeeklySummary: While the orthodox consensus is that there is no trade-off between inflation and output in the long run, there is no unanimity on the short-run effect of inflation on economic growth. We attempt to estimate the non-linear relationship between inflation and economic growth for 54 developing countries over the 1971-2010 period. Our results suggest a positive association between inflation and gross domestic product growth up to a rough inflation threshold; we did this separately for Asia, Latin America and the Caribbean, and Sub-Saharan Africa. The threshold rate of inflation is found to be 23.5% for Latin America and the Caribbean, approximately 11% for Asia, and 23.6% for Sub-Saharan Africa. These results have important policy implications for developing countries, which often struggle to find the right balance between low inflation and high economic growth.

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Item type	Current location	Call number	Vol info	Status	Date due	Barcode
Articles	Ahmedabad (HO)	(Browse shelf)	Vol. 50, Issue. 37	Available		020464

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Previous	The agrarian question in the 21st century	Science and theories of caste origins	Mergers and acquisitions of banks in post-reform India	Non-linear relationship between inflation and growth in deve countries	Caste among the Indian diaspora in Africa	Catastrophic failure of public trust in mining	Rural credit cooperatives in Maharashtra	Next

While the orthodox consensus is that there is no trade-off between inflation and output in the long run, there is no unanimity on the short-run effect of inflation on economic growth. We attempt to estimate the non-linear relationship between inflation and economic growth for 54 developing countries over the 1971-2010 period. Our results suggest a positive association between inflation and gross domestic product growth up to a rough inflation threshold; we did this separately for Asia, Latin America and the Caribbean, and Sub-Saharan Africa. The threshold rate of inflation is found to be 23.5% for Latin America and the Caribbean, approximately 11% for Asia, and 23.6% for Sub-Saharan Africa. These results have important policy implications for developing countries, which often struggle to find the right balance between low inflation and high economic growth.

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