Inflation, Disinflation, and Growth

Author/Editor:

Atish R. Ghosh ; Steven T Phillips

Publication Date:

May 1, 1998

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Although few would doubt that very high inflation is bad for growth, there is much less agreement about moderate inflation’s effects. Using panel regressions and a nonlinear specification, this paper finds a statistically and economically significant negative relationship between inflation and growth. This relationship holds at all but the lowest inflation rates and is robust across various samples and specifications. The method of binary recursive trees identifies inflation as one the most important statistical determinants of growth. Finally, while there are short-run growth costs of disinflation, these are only relevant for the most severe disinflations, or when the initial inflation rate is well within the single-digit range.

Series:

Working Paper No. 98/68

Subject:

Notes:

Also published in Staff Papers, Vol. 45, No. 4, December 1998.

English

Publication Date:

May 1, 1998

ISBN/ISSN:

9781451961188/1018-5941

Stock No:

WPIEA0681998

Format:

Paper

Pages:

44

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