Inflation Crises and Long-Run Growth

Gender Inequality in a Globalizing World

“…For example, South Korea's GDP growth from 1970-95, which averaged 7% a year, was accompanied by an average annual inflation rate of 13%. 4 This is consistent with the findings of a World Bank study by Bruno and Easterly (1998) that found no evidence of a negative effect of inflation on growth until it reaches 40% a year.…”

Relationship Between Inflation and Real Economic Growth in Rwanda

“…That is, at lower rates of inflation, the relationship is not significant or even positive, but at higher rates, inflation has a significantly negative effect on growth. Bruno and Easterly (1998) demonstrate that a number of economies have experienced sustained inflation of 20-30% without suffering any apparently major adverse consequences. However, once the rate of inflation exceeds some critical level (estimated at 40%), significant declines occur in the level of real activity.…”

Commentary

“…They make an even better case that growth is low during inflation crises. Indeed, the numbers reported in Table 3 in Bruno and Easterly (1995) indicate that crisis growth is lower than precrisis and postcrisis growth not only on average (as reported in their article in this issue) but also in virtually every episode in every country.…”

“…Because such excluded crises will presumably tend to be longer lasting, there probably is a bias in favor of finding that output losses during crises eventually are recovered. Second, if I use the data in Table 3 in Bruno and Easterly (1995) to extrapolate growth rates without controlling for, say, investment, I find that in about half the episodes that are rich enough to include both precrisis and postcrisis growth, the precrisis rate is higher than the postcrisis rate. Of course, the calculation reported in Bruno and Easterly's article in this issue controls for the usual suspects.…”

“…Of course, the calculation reported in Bruno and Easterly's article in this issue controls for the usual suspects. But as noted in Bruno and Easterly (1995), for simple or sophis-ticated calculations, it probably is necessary to have much longer time series than are available to reliably estimate trend rates of growth.…”