 Threshold effects in the relationship between inflation and growth: a new panel-data approachDavid Drukker, Pedro Gomis-Porqueras and Hernandez -erme Paula MPRA Paper from University Library of Munich, Germany Abstract: In this paper we use a new approach to throw light on the old question of the super-neutrality of money. Recent theoretical results suggest a threshold model instead of super-neutrality. To ascertain whether or not there is a threshold level of inflation above which the effect of inflation on long-run growth changes, we apply new econometric methods for estimation and inference in non-dynamic, fixed-effects, panel-data models that may contain threshold effects. In the full sample of 138 countries over the period 1950–2000, we find that there is one threshold that is well identified by the data; the estimated value of the threshold is 19.16%. For the industrialized sample, our results indicate that there are two threshold points at 2.57% and 12.61%. In the full sample, if the initial inflation rate is below 19.16%, increases in inflation do not have a statistically significant effect on growth. In contrast, when the initial inflation is above 19.16%, further increases in inflation will decrease long-run growth. Keywords: threshold model; nonlinear model; empirical growth; super-neutrality; panel data (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:38225 Access Statistics for this paper More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC. |
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