Semiparametric Evidence on the Long-Run Effects of Inflation on Growth

Vaona, Andrea and Schiavo, Stefano (2005) Semiparametric Evidence on the Long-Run Effects of Inflation on Growth. UNSPECIFIED. (Unpublished)

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    Two major findings of the empirical literature on the connection between inflation and output growth is that their relationship is non linear and that there exists a threshold inflation level below which inflation has a positive impact on growth and above which inflation has a negative impact on growth. In this paper we adopt a semiparametric estimator and we show that the first finding holds true even dropping the specification assumptions typical of parametric models. We also show that a threshold level does exist and it is around 10% for developed countries and 15% for developing ones. However, below the threshold level inflation does not appear to have a positive impact on growth, rather it does not have any substantial effect on it.

    Item Type: Departmental Technical Report
    Department or Research center: Economics
    Subjects: H Social Sciences > HB Economic Theory
    Uncontrolled Keywords: Inflation, Growth.
    Report Number: 20
    Repository staff approval on: 12 Jan 2006

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