Non‐linear Effects of Inflation on Economic Growth in the Democratic Republic of the Congo

Boniface Yemba, Erick Kitenge and Paul Woodburne

South African Journal of Economics, 2020, vol. 88, issue 4, 536-550

Abstract: This paper presents one of the first empirical studies that employ the regression kink model with an unknown threshold to estimate the turning point in the relationship between inflation and economic growth. To deal with the asymptotic non‐normality of the regression function, we use a numerical delta bootstrap method and inference methods in the construction of confidence intervals for the regression function. Our estimated threshold suggests that, in the Democratic Republic of Congo, inflation rates lower than 17.2% would drive economic growth, but any inflation rate beyond that threshold will harm the growth. The Congolese policymakers should be aware of this threshold in the implementation of any inflation‐targeting policy instruments or strategies.

Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:bla:sajeco:v:88:y:2020:i:4:p:536-550

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