Threshold Effects in the Relationship Between Inflation and Growth

Abdelhak Senhadji and Mohsin Khan

No 2000/110, IMF Working Papers from International Monetary Fund

Abstract: This paper reexamines the issue of the existence of threshold effects in the relationship between inflation and growth, using new econometric techniques that provide appropriate procedures for estimation and inference. The threshold level of inflation above which inflation significantly slows growth is estimated at 1–3 percent for industrial countries and 7–11 percent for developing countries. The negative and significant relationship between inflation and growth, for inflation rates above the threshold level, is quite robust with respect to the estimation method, perturbations in the location of the threshold level, the exclusion of high-inflation observations, data frequency, and alternative specifications.

Keywords: WP; growth rate; rate of inflation; standard deviation (search for similar items in EconPapers)
Pages: 32
Date: 2000-06-01
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Citations: View citations in EconPapers (80)

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Journal Article: Threshold Effects in the Relationship Between Inflation and Growth (2001)
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