EconPapers    
Economics at your fingertips  
 

Does Inflation Slow Long-Run Growth in India?

Kamiar Mohaddes and Mehdi Raissi

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: This paper examines the long-run relationship between consumer price index industrial workers (CPI-IW) inflation and GDP growth in India. We collect data on a sample of 14 Indian states over the period 1989-?2013, and use the cross-sectionally augmented distributed lag (CS-DL) approach of Chudik et al. (2013) as well as the standard panel ARDL method for estimation? to account for cross-state heterogeneity and dependence, dynamics and feedback effects. Our findings suggest that, on average, there is a negative long-run relationship between inflation and economic growth in India. We also find statistically-significant inflation-growth threshold effects in the case of states with persistently-elevated inflation rates of above 5.5 percent. This suggests the need for the Reserve Bank of India to balance the short-term growth-inflation trade-off, in light of the long-term negative effects on growth of persistently-high inflation.

Keywords: India; inflation; growth; threshold effects; cross-sectional heterogeneity and dependence. (search for similar items in EconPapers)
JEL-codes: C23 E31 O40 (search for similar items in EconPapers)
Date: 2014-11-28
New Economics Papers: this item is included in nep-gro and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://www.econ.cam.ac.uk/sites/default/files/pub ... pe-pdfs/cwpe1440.pdf

Related works:
Working Paper: Does Inflation Slow Long-Run Growth in India? (2014) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:1440

Access Statistics for this paper

More papers in Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge
Bibliographic data for series maintained by Jake Dyer ().

 
Page updated 2025-03-22
Handle: RePEc:cam:camdae:1440