Non-linearity in the Inflation-Growth Relationship in Developing Economies: Evidence from a Semiparametric Panel Model

Deniz Baglan and Emre Yoldas

No 2014-51, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Using data on developing economies, we estimate a flexible semiparametric panel data model that incorporates potentially nonlinear effects of inflation on economic growth. We find that inflation is associated with significantly lower growth only after it reaches about 12 percent, which is notably lower than the comparable estimate obtained from a threshold model. Our results also suggest that models with restrictive functional form assumptions tend to underestimate marginal effects of inflation on economic growth. We also document significant variation in the effect of inflation on growth across countries and over time.

Keywords: Inflation; economic growth; semiparametric panel data model; series estimation; bootstrap (search for similar items in EconPapers)
JEL-codes: C23 O40 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2014-07-16
New Economics Papers: this item is included in nep-fdg, nep-gro and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

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Journal Article: Non-linearity in the inflation–growth relationship in developing economies: Evidence from a semiparametric panel model (2014)
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