{
  "title": "Estimating The Inflation–Growth Nexus—A Smooth Transition Model",
  "publication": "IMF Working Papers, March 1, 2010",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/estimating-the-inflationgrowth-nexus-a-smooth-transition-model-23729",
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  "summary": "Motivated by the global inflation episode of 2007-08 and concern that high levels of inflation could undermine growth, this paper uses a panel of 165 countries and data for 1960-2007 to revisit the nexus between inflation and growth.",
  "sections": [
    {
      "heading": "Summary",
      "content": "- Motivated by the global inflation episode of 2007-08 and concern that high levels of inflation could undermine growth.\n- Uses a panel of 165 countries and data for 1960-2007.\n- Employs a smooth transition model to investigate the speed at which inflation beyond a threshold becomes harmful to growth.\n- Focuses on the policy relevance of how quickly inflation turns harmful as the world economy recovers."
    },
    {
      "heading": "Methodology",
      "content": "- Empirical approach: smooth transition model applied to panel data of 165 countries for 1960-2007.\n- Purpose: identify inflation threshold(s) and the speed at which inflation above the threshold affects growth."
    },
    {
      "heading": "Key Findings",
      "content": "- For all country groups (except for advanced countries), inflation above a threshold of about 10 percent quickly becomes harmful to growth.\n- For advanced economies, the inflation threshold is much lower (no specific numeric threshold reported).\n- For oil exporting countries:\n  - Estimates are less robust, possibly reflecting heterogeneity among oil producers.\n  - The effect of higher inflation for oil producers is found to be stronger."
    },
    {
      "heading": "Policy Implications and Recommendations",
      "content": "- The rapid adverse effect of inflation above the relevant threshold suggests the need for a prompt policy response to inflation at or above that threshold.\n- Policy relevance differs by country group:\n  - Non-advanced country groups: act promptly when inflation approaches or exceeds about 10 percent.\n  - Advanced economies: heed a much lower threshold for inflation-induced harm to growth.\n  - Oil exporters: recognize heterogeneous responses across producers and the potentially stronger negative effect of higher inflation."
    },
    {
      "heading": "Subject Tags and Keywords",
      "content": "- Subject: Emerging and frontier financial markets, Inflation, Oil, Population growth, Terms of trade\n- Keywords: growth-inflation literature, growth-inflation relationship, inflation threshold, inflation-growth literature, WP\n\nRaphael A Espinoza, Ananthakrishnan Prasad, and Gene L. Leon, \"Estimating The Inflation–Growth Nexus—A Smooth Transition Model\", March 1, 2010. DOI: https://doi.org/10.5089/9781451982190.001\n\n---\n\n Content in this bundle\n\n- wp1076 - Appendix A. Country Groups\n  - wp1076 - Appendix A. Country Groups (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp1076 - Appendix A. Country Groups (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/estimating-the-inflationgrowth-nexus-a-smooth-transition-model-23729"
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    "Authors: Raphael A Espinoza, Ananthakrishnan Prasad, Gene L. Leon",
    "Published: March 1, 2010",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451982190.001",
    "Motivated by the global inflation episode of 2007-08 and concern that high levels of inflation could undermine growth.",
    "Uses a panel of 165 countries and data for 1960-2007.",
    "Employs a smooth transition model to investigate the speed at which inflation beyond a threshold becomes harmful to growth.",
    "Focuses on the policy relevance of how quickly inflation turns harmful as the world economy recovers.",
    "Empirical approach: smooth transition model applied to panel data of 165 countries for 1960-2007.",
    "Purpose: identify inflation threshold(s) and the speed at which inflation above the threshold affects growth.",
    "For all country groups (except for advanced countries), inflation above a threshold of about 10 percent quickly becomes harmful to growth.",
    "For advanced economies, the inflation threshold is much lower (no specific numeric threshold reported).",
    "For oil exporting countries:",
    "The rapid adverse effect of inflation above the relevant threshold suggests the need for a prompt policy response to inflation at or above that threshold.",
    "Policy relevance differs by country group:",
    "Subject: Emerging and frontier financial markets, Inflation, Oil, Population growth, Terms of trade",
    "Keywords: growth-inflation literature, growth-inflation relationship, inflation threshold, inflation-growth literature, WP",
    "**_wp1076 - Appendix A. Country Groups**"
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