The Effect of Inflation on Growth: Evidence from a Panel of Transition Countries

Max Gillman and Mark Harris

No E2008/25, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: The paper examines the effect of inflation on growth in transition countries. It presents panel data evidence for 13 transition countries over the 1990-2003 period,it uses a fixed effects, full-information maximum likelihood, panel approach to account for possible bias from correlations among the unobserved effects and the observed country heterogeniety. The results find a strong, robust, negative effect of inflation on growth, and one that declines in magnitude as the inflation rate increases. These results include a role for a normalized money demand, by itself and as part of a nonlinearity in the inflation-growth effect. And these results derive from both a baseline single equation model and one that is then expanded into a three equation simultaneous system. This allows for possible simultaneity bias in the baseline model.

Keywords: Growth; transition; panel data; inflation; money demand; endogeneity (search for similar items in EconPapers)
JEL-codes: C23 E44 O16 O42 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2008-10
New Economics Papers: this item is included in nep-mac, nep-mon and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published in Economics of Transition , Volume 18, Issue 4 (October), pages 697-714.

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Related works:
Working Paper: The Effect of Inflation on Growth - Evidence from a Panel of Transition Countries (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:cdf:wpaper:2008/25

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