Contrasting Models of the Effect of Inflation on Growth

Gillman, Max; Kejak, Michal

doi:10.1111/j.0950-0804.2005.00241.x

Cited by 65 publications

(54 citation statements)

References 45 publications

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“…However, this ambiguity disappears when money is introduced as a transaction device through a shopping-time technology, Saving (1971) and Kimbrough (1986). Gillman and Kejak (2005) surveys the theoretical literature on in ‡ation and endogenous growth, and show that a broad range of models can generate a negative association between in ‡ation and growth; see Gomme (1993) andDe Gregorio (1993) among others. They also analyze whether the in ‡ation-growth relationship is non-linear (becomes weaker as the in ‡ation rate rises).…”

Section: In ‡Ation and Growthmentioning

confidence: 99%

Debt, Inflation and Growth Robust Estimation of Long-Run Effects in Dynamic Panel Data Models

Chudík¹,

Mohaddes²,

Pesaran³

et al. 2013

gwp

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This paper investigates the long-run effects of public debt and inflation on economic growth. Our contribution is both theoretical and empirical. On the theoretical side, we develop a cross-sectionally augmented distributed lag (CS-DL) approach to the estimation of long-run effects in dynamic heterogeneous panel data models with cross-sectionally dependent errors. The relative merits of the CS-DL approach and other existing approaches in the literature are discussed and illustrated with small sample evidence obtained by means of Monte Carlo simulations. On the empirical side, using data on a sample of 40 countries over the 1965-2010 period, we find significant negative long-run effects of public debt and inflation on growth. Our results indicate that, if the debt to GDP ratio is raised and this increase turns out to be permanent, then it will have negative effects on economic growth in the long run. But if the increase is temporary then there are no long-run growth effects so long as debt to GDP is brought back to its normal level. We do not find a universally applicable threshold effect in the relationship between public debt and growth. We only find statistically significant threshold effects in the case of countries with rising debt to GDP ratios.

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Section: In ‡Ation and Growthmentioning

confidence: 99%

Debt, Inflation and Growth Robust Estimation of Long-Run Effects in Dynamic Panel Data Models

Chudík¹,

Mohaddes²,

Pesaran³

et al. 2013

gwp

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show abstract

“…On the basis of this result, we suggest that a monetary institution 25 that keeps the inflation rate low should be the policy focus in development economics. 22 …”

Section: Exogenous Development In Financial Intermediarymentioning

confidence: 99%

Liquidity, Innovation and Growth

2009

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Many countries simultaneously suffer from high rates of inflation, low growth rates of per capita income and poorly developed financial sectors. In this paper, we integrate a microfounded model of money and finance into a model of endogenous growth to examine the effects of inflation and financial development. A novel feature of the model is that the market for innovation goods is decentralized. Financial intermediaries arise endogenously to provide liquid funds to the innovation sector. We calibrate the model to address two quantitative issues. One is the effects of an exogenous improvement in the productivity of the financial sector on welfare and per capita growth. The other is the effects of inflation on welfare and growth. Consistent with the data but in contrast to previous work, reducing inflation generates large gains in the growth rate of per capita income as well as in welfare. Relative to reducing inflation, improving the efficiency of the financial market increases growth and welfare by much smaller amounts.

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“…However, this ambiguity disappears when money is introduced as a transaction device through a shopping-time technology, as in Saving (1971) and Kimbrough (1986). Gillman and Kejak (2005) survey the theoretical literature on inflation and endogenous growth, and show that a broad range of models can generate a negative association between inflation and growth (see Gomme 1993, De Gregorio 1993. They also analyze whether the inflation-growth relationship is nonlinear (that is, it becomes weaker as the inflation rate rises).…”

Section: Why Study the Inflation-long-term Growth Relationship?mentioning

confidence: 99%

Taming Indian Inflation

Cashin¹,

Anand²

2016

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Contrasting Models of the Effect of Inflation on Growth

Cited by 65 publications

References 45 publications

Debt, Inflation and Growth Robust Estimation of Long-Run Effects in Dynamic Panel Data Models

Debt, Inflation and Growth Robust Estimation of Long-Run Effects in Dynamic Panel Data Models

Liquidity, Innovation and Growth

Taming Indian Inflation

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