THE INFLATION-GROWTH NEXUS: A SYSTEMATIC REVIEW OF INTERNATIONAL EVIDENCE

Deogratius Kimolo, Nicholas M. Odhiambo and Sheilla Nyasha
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Deogratius Kimolo: University of South Africa (UNISA), Pretoria, South Africa
Nicholas M. Odhiambo: Professor, University of South Africa (UNISA), Pretoria, South Africa
Sheilla Nyasha: Lecturer, University of South Africa (UNISA), Pretoria, South Africa

Studii Financiare (Financial Studies), 2026, vol. 30, issue 2, 52-88

Abstract: This paper provides a systematic review of the empirical literature on the relationship between inflation and economic growth. By synthesising findings from 60 studies, we analyse the impact of inflation on growth, the presence of threshold effects, and the direction of causality between the two variables. Our analysis revealed a complex and context-dependent relationship, with diverse outcomes across countries and regions. While some studies indicate a positive impact of moderate inflation on growth, others find negative or insignificant effects of high inflation. Notably, the literature highlights the existence of varying inflation thresholds, beyond which adverse effects on growth become more pronounced. The direction of causality between inflation and growth is also multifaceted, with evidence supporting unidirectional, bidirectional, and insignificant causality. These findings underscore the importance of policymakers adopting nuanced approaches that balance price stability with sustainable economic growth, considering country-specific characteristics and institutional frameworks. The review also points to the need for researchers to focus on refining methodologies, expanding data coverage, and exploring heterogeneity in this relationship to provide more robust and actionable insights for policymakers.

Keywords: price level; macroeconomic variables; economic development; causality; monetary policy (search for similar items in EconPapers)
JEL-codes: E31 E47 E52 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:vls:finstu:v:30:y:2026:i:2:p:52-88

DOI: 10.65672/fs.2026.2.3

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