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Inflation-Growth Nexus in Africa: Evidence from a Pooled CCE Multiple Regime Panel Smooth Transition Model

Renee van Eyden (), Tolga Omay () and Rangan Gupta ()

No 201504, Working Papers from University of Pretoria, Department of Economics

Abstract: This paper analyses the empirical relationship between inflation and growth using a panel data estimation technique, Multiple Regime Panel Smooth Transition Regression (MR-PSTR), which takes into account the nonlinearities in the data. By using a panel data set for 10 African countries that permit us to control for unobserved heterogeneity at both country and time levels, we find that a statistically significant negative relationship exists between inflation and growth for the inflation rates above the critical threshold levels of 9% and 30% which are endogenously determined. Furthermore, we remedy the cross section dependence with the Common Correlated Effects (CCE) estimator.

Keywords: Inflation; growth; threshold effects; multiple regime panel smooth transition regression model; cross section dependence; common correlated effects (search for similar items in EconPapers)
JEL-codes: C33 E31 O40 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2015-02
New Economics Papers: this item is included in nep-gro and nep-mac
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