Of Inflation and Growth Nexus in BRIMC Economies

Waseem Khadim, Saddam Ilyas and Bilal Mehmood
Additional contact information
Waseem Khadim: GC University, Lahore, Pakistan.
Saddam Ilyas: GC University, Lahore, Pakistan.
Bilal Mehmood: GC University, Lahore, Pakistan.

International Journal of Economics and Empirical Research (IJEER), 2016, vol. 4, issue 1, 32-45

Abstract: Purpose: This study aims to assess the nonlinearity in inflation-growth nexus for BRIMC economies. It also proposes a threshold level beyond which inflation becomes detrimental to growth.Methodology: Data for the period of 1970–2013 has been used to scrutinize the said nexus via dynamic panel cointegration techniques of: PMG, MG and DFE. Hausman test has been employed to choose comparatively efficient and consistent estimator among the above estimators. Findings: Our findings reveal that the relationship between economic growth and inflation within the linear frame work is significantly positive in the long run, but when we introduce a square term of inflation this relationship becomes negative though it still remains statistically significant. This sign switching behavior of inflation from positive to negative confirms the existence of non-linear relationship between inflation and economic growth in BRIMC economies. Therefore we have found out the threshold level of inflation for BRIMC economies which is based on a fixed-effect panel threshold model proposed by Hansen (1999). Our results show that inflation can hamper the growth of BRIMC economies if it exceeds the threshold level of 8.32%. Recommendations: However, below this threshold, inflation is beneficial for the long run economic growth.

Keywords: : Cointegration; Threshold model; Growth; Inflation (search for similar items in EconPapers)
JEL-codes: C3 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://tesdo.org/shared/upload/pdf/papers/IJEER,%204_1_,%2032-45.pdf (application/pdf)
https://tesdo.org/journal_detail.php?paper_id=252&expand_year=2016 (text/html)

Related works:
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:ijr:journl:v:4:y:2016:i:1:p:32-45

Access Statistics for this article

International Journal of Economics and Empirical Research (IJEER) is currently edited by Dr. Muhammad Shahbaz (PhD Applied Economics)

More articles in International Journal of Economics and Empirical Research (IJEER) from The Economics and Social Development Organization (TESDO) Contact information at EDIRC.
Bibliographic data for series maintained by Dr. Muhammad Shahbaz (PhD Applied Economics) ( this e-mail address is bad, please contact ).