This paper examines the inflation-growth interaction for different country groups with similar national incomes for the period 1970-2011. It could be confirmed that this relation is strictly nonlinear with a threshold level of inflation of 3% for high-income countries and 13% for low-income countries. Although this result is in line with previous empirical studies based on
a similar data set, much smaller samples needed to be used to obtain these results. Inflation threshold levels are estimated using the iteration method and different panel-specific techniques. Strongly significant thresholds were yielded only when controlling for country-fixed effects. Policymakers can use the findings for high-income or industrialised countries as a guide for inflation targeting, however more precise analyses for less advanced countries are needed in order to be useful for monetary policy.
Inhaltsverzeichnis (Table of Contents)
- Introduction
- Inflation and Economic Growth in Developing vs. Developed Countries
- Literature Review
- Motivation
- Theoretical Background
- Effect of Inflation on the Balanced-Growth Path
- Nonlinearity in the Inflation-Growth Nexus
- The Methodology
- The Data
- Results
- OLS
- Panel Regressions
- Two-way Fixed Effects
- Mean Group Estimator
- Common Correlated Effects MG estimator
- Conclusion and Further Discussion
- References
- Appendix
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
The dissertation aims to examine the relationship between inflation and economic growth for different country groups with similar national incomes during the period 1970-2011. The study seeks to determine if this relationship is nonlinear and to identify the threshold levels of inflation beyond which the relationship becomes negative.
- The impact of inflation on economic growth
- The existence of a nonlinear relationship between inflation and growth
- The identification of inflation threshold levels for different country groups
- The application of panel data analysis techniques to study the inflation-growth nexus
- The implications of the findings for monetary policy
Zusammenfassung der Kapitel (Chapter Summaries)
The first chapter introduces the topic of the dissertation, outlining the main objective of macroeconomic policy and the importance of understanding the relationship between inflation and growth. Chapter 2 provides a brief overview of the historical debate surrounding the inflation-growth relationship, highlighting the evolution of understanding from the early 1970s onwards. Chapter 3 presents a detailed review of the relevant literature on the subject, focusing on previous studies that have investigated the nonlinear relationship between inflation and growth. The fourth chapter explores the motivation for undertaking this dissertation, outlining the key gaps in existing research and the potential contributions of the study. Chapter 5 lays out the theoretical framework underpinning the dissertation, focusing on the impact of inflation on the balanced-growth path and exploring the concept of nonlinearity in the inflation-growth nexus. Chapter 6 delves into the methodology employed in the dissertation, outlining the data sources and the econometric techniques used to analyze the relationship between inflation and growth. Chapter 7 presents the empirical results of the analysis, highlighting the findings of various panel regressions and the estimated inflation threshold levels. The dissertation concludes with a discussion of the key findings, their policy implications, and suggestions for future research.
Schlüsselwörter (Keywords)
The key terms and concepts examined in this dissertation include inflation, economic growth, nonlinear relationship, threshold level, panel data analysis, fixed effects, mean group estimator, common correlated effects, monetary policy, high-income countries, low-income countries, and developing countries. The study focuses on the impact of inflation on economic growth and the implications of the findings for policymakers.
- Quote paper
- Anna Miller (Author), 2013, Nonlinear Relation Between Inflation and Growth – Panel Data Analysis, Munich, GRIN Verlag, https://www.grin.com/document/263454
