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Inflation–growth nexus: evidence from a pooled CCE multiple-regime panel smooth transition model

Tolga Omay (), Reneé Eyden () and Rangan Gupta ()
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Reneé Eyden: University of Pretoria

Empirical Economics, 2018, vol. 54, issue 3, 913-944

Abstract: Abstract This paper analyses the empirical relationship between inflation and growth using a panel data estimation technique, multiple-regime panel smooth transition regression, which takes into account the nonlinearities in the data. By using a panel data set for 10 countries in the Southern African Development Community permitting us to control for unobserved heterogeneity at both country and time levels, we find that a statistically significant negative relationship exists between inflation and growth for inflation rates above the critical threshold levels of 12 and 32% which are endogenously determined. Furthermore, we remedy the cross-section dependence with the common correlated effects estimator.

Keywords: Inflation; Growth; Threshold effects; Multiple-regime panel smooth transition regression model; Cross-section dependence; Common correlated effects (search for similar items in EconPapers)
JEL-codes: C33 E31 O40 (search for similar items in EconPapers)
Date: 2018
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