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From Inflation Targeting to achieving Economic Growth

Cesar Carrera ()

No 2017-92, Working Papers from Peruvian Economic Association

Abstract: Most economists agree that the relationship between long-run economic growth and inflation is negative. It is well documented that countries with inflation target achieve lower levels of inflation. But there is no study that relates inflation target and growth. I focus this study in identifying this relationship. I follow Sala-i-Martin (1997) and sample 45 countries that have an inflation target. This variable is then evaluated by controlling for three variables that are strongly correlated with economic growth and different subsets that belong to a set of variables that the literature agrees in being correlated with long-run economic growth. This strategy allows me to have a distribution of the parameter that captures a link between inflation target and growth. My results suggest that such effect, if any, is slightly negative.

Keywords: Inflation target; inflation; growth (search for similar items in EconPapers)
JEL-codes: E31 E58 N16 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2017-04
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