Warning: Inflation May Be Harmful to Your Growth

While few doubt that very high inflation is bad for growth, there is less agreement about the effects of moderate inflation. Using panel regressions and allowing for a nonlinear specification, this paper finds a statistically and economically significant negative relationship between inflation and g...

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Bibliographic Details
Published inIMF staff papers Vol. 45; no. 4; pp. 672 - 710
Main Authors Ghosh, Atish, Phillips, Steven
Format Journal Article
LanguageEnglish
Published Washington International Monetary Fund 01.12.1998
Palgrave Macmillan
SeriesIMF Staff Papers
Subjects
Coefficients
Correlation analysis
Deflation
Disinflation
Economic growth
Economic growth rate
Effects
GDP
Gross Domestic Product
Human capital
Inflation
Inflation rates
Inflation shocks
International
Low inflation
Macroeconomic policy
Prices
Regression analysis
Regression coefficients
Statistical significance
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Summary:While few doubt that very high inflation is bad for growth, there is less agreement about the effects of moderate inflation. Using panel regressions and allowing for a nonlinear specification, this paper finds a statistically and economically significant negative relationship between inflation and growth, which holds robustly at all but the lowest inflation rates. A "decision-tree" technique identifies inflation as one of the most important determinants of growth. Finally, short-run growth costs of disinflation are only relevant for the most severe disinflations, or when the initial inflation rate is well within the single-digit range.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0020-8027
1020-7635
2041-4161
1564-5150
2041-417X
DOI:10.2307/3867589