INFLATION AND THE ECONOMIC GROWTH: Evidence from Five Asian Countries

Muhammad Azam and Saleem Khan*

Pakistan Journal of Applied Economics, 2018, vol. 28, issue 2, 235-252

Abstract: The purpose of this study is to investigate the effects of inflation on rate of economic growth of the Five Asian countries; namely, Bangladesh, Iran, Indonesia, Malaysia and Pakistan, for the period 1973 to 2016. Using the appropriate tests, the property was checked and found not to exhibit the unit root, thus making the data to be stationary. Based on data of the study, the Least Squares and traditional panel estimation techniques were used. The Least Squares results revealed that inflation has negative and statistically significant impact on economic growth in all sampled countries. Similarly, the panel data techniques were also confirmed to be negative with significant relationship between the rates of inflation and economic growth. Thus, the main points emerging are that inflation is not helpful but harmful to the rate of economic growth. This study contributes a valuable addition to the existing literature about linkages of inflation rate and the economic growth. The findings suggest that an effective macroeconomic policymix needs to be devised to control inflation and encourage the process of economic growth and development; and thereby largely bolster the social well-being.

Date: 2018
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