Inflation and economic growth: A dynamic panel threshold analysis for Asian economies

Thanabalasingam Vinayagathasan

Journal of Asian Economics, 2013, vol. 26, issue C, 31-41

Abstract: This paper investigates the existence of a threshold level for inflation and how any such level affects the growth of Asian economies. We use a dynamic panel threshold growth regression, which allows for fixed effects and endogeneity. We observe a nonlinear relationship between inflation and economic growth for 32 Asian countries over the period 1980–2009. We detect an inflation threshold of approximately 5.43%, at a 1% level of significance. We find that inflation hurts growth when it exceeds 5.43% but has no effect below this level. Different estimation methods determine that the effect of inflation on growth is robust. Our findings may be useful to central banks as a guide for inflation targeting.

Keywords: Dynamic panel threshold model; Economic growth; Inflation; Inflation threshold (search for similar items in EconPapers)
JEL-codes: C23 E31 O40 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (63)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:26:y:2013:i:c:p:31-41

DOI: 10.1016/j.asieco.2013.04.001

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