Threshold Effects in the Relationship Between Inflation and Growth

Download or read book Threshold Effects in the Relationship Between Inflation and Growth written by Mohsin S. Khan and published by International Monetary Fund. This book was released on 2000-06 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.