The Negative Inflation-Growth Effect: Theory and Evidence

Mark Harris, Max Gillman and Laszlo Matyas ()

Melbourne Institute Working Paper Series from Melbourne Institute of Applied Economic and Social Research, The University of Melbourne

Abstract: The paper presents a monetary model of endogenous growth and specifies an econometric model consistent with it. The economic model suggests a negative inflation-growth effect, and one that is stronger at lower levels of inflation. Empirical evaluation of the model is based on a large panel of OECD and APEC member countries over the years 1961-1997. The hypothesized negative inflation effect is found comprehensively for the OECD countries to be significant and, as in the theory, to increase marginally as the inflation rate falls. For APEC countries, the results from using instrumental variables also show significant evidence of a similar behavior.

Pages: 40 pages
Date: 2001-11
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:iae:iaewps:wp2001n12

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