Inflation and growth: new evidence from a dynamic panel threshold analysis

Stephanie Kremer (), Alexander Bick and Dieter Nautz

Empirical Economics, 2013, vol. 44, issue 2, 878 pages

Abstract: We introduce a dynamic panel threshold model to estimate inflation thresholds for long-term economic growth. Advancing on Hansen (J Econom 93:345–368, 1999 ) and Caner and Hansen (Econom Theory 20:813–843, 2004 ), our model allows the estimation of threshold effects with panel data even in case of endogenous regressors. The empirical analysis is based on a large panel-dataset including 124 countries. For industrialized countries, our results confirm the inflation targets of about 2% set by many central banks. For non-industrialized countries, we estimate that inflation rates exceeding 17% are associated with lower economic growth. Below this threshold, however, the correlation remains insignificant. Copyright Springer-Verlag 2013

Keywords: Inflation thresholds; Inflation and growth; Dynamicpanel threshold model; C72; C23; O40 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (354)

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DOI: 10.1007/s00181-012-0553-9

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