Inflation and Economic Growth Nexus in BRICS: Evidence from ARDL Bound Testing Approach

Abstract

The present study investigated the inflation growth nexus in the context of BRICS countries. The study used time series data covering from the period 1980 to 2012. The data sources are cumulated from the World Bank, World Economic Outlook (WEO). The empirical findings of the study indicate that a long run positive relationship between inflation and economic growth only for China and South Africa at the 5 percent level of significance. The study also found that there is a unidirectional causality between economic growth and inflation in the context of India whereas; bidirectional causality takes place in the case of China. The VAR analysis could not find a consistent short run relationship between inflation and economic growth over ten years ahead for BRICS countries. From the policy implication point of view the study suggests that policy makers in BRICS should consider the short run relationship between inflation and economic growth while, the China and South Africa policy makers should pay attention to both short run and long run relationship.

The Inflation-Growth Relationship in SSA Inflation-Targeting Countries

“…(2013) establish a 17 percent threshold; Mahawiya (2015) find a 17.9 percent for ECOWAS countries (including Ghana) and 14.5 percent for SADC countries (including South Africa); Ibarra and Trupkin (2016) find a 19.1 percent inflation threshold whilst Ndoricimpa (2017) estimate a 6.7 percent inflation threshold Under the second group of studies, those being panel studies which only include South Africa in the empirical analysis, the available studies can be narrowed down to the works of Seleteng et al (2013), Bittencourt et al (2015), Behera and Mishra (2016) and Manamperi (2014). Note that whilst the works of Manamperi 2014, Bittencourt et al (2015) and Behera and Mishra (2016) all assume linear empirical frameworks, on the other hand, the study of Seleteng et al (2013) applies a nonlinear empirical framework (smooth transition regression model). In particular, Manamperi (2014) find a negative inflation-growth relationship in the short-run and no significant relationship over the long-run; Bittencourt et al (2015) establish a long-run negative inflation-growth relationship; Behera and Mishra (2016) find a positive relationship for South Africa in the short-run which turns positive in the long-run whereas Seleteng et al (2013) estimate an inflation threshold of 18.9 percent.…”

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

“…By using the cointegration method, the empirical result found that there is a long-run relationship between inflation and economic growth. Behera and Mishra (2016) studied the inflation growth nexus in the context of BRICS countries. By employing the ARDL model econometric technique, the study found that there is a unidirectional causality from inflation to economic growth in the context of India and bidirectional causality in the case of China.…”

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

“…The result also reveals that there is a unidirectional causality between CPI and GDP in the context of all South Asian countries. Behera and Mishra (2016) examined the inflation growth nexus in BRICS.…”