Inflation and economic growth: A dynamic panel threshold analysis for Asian economies |
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| Affiliation: | 1. Vinod Gupta School of Management, Indian Institute of Technology Kharagpur, WB 721302, India;2. Department of Economics, Trent University, Peterborough, Ontario K9J 7B8, Canada;3. Department of Economics, University of Wisconsin at Parkside, Kenosha, WI 53144, USA;1. China Center for Economic Studies, School of Economics, Fudan University, Shanghai, China;2. Department of Economics, University of St. Gallen, St. Gallen, Switzerland;3. School of Economics, Chukyo University, Nagoya, Japan;4. Department of Economics, Chinese Culture University, Taipei, Taiwan;1. Banco de Mexico, Mexico;2. Universidad de Buenos Aires, Argentina |
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| Abstract: | This paper investigates the existence of a threshold level for inflation and how any such level affects the growth of Asian economies. We use a dynamic panel threshold growth regression, which allows for fixed effects and endogeneity. We observe a nonlinear relationship between inflation and economic growth for 32 Asian countries over the period 1980–2009. We detect an inflation threshold of approximately 5.43%, at a 1% level of significance. We find that inflation hurts growth when it exceeds 5.43% but has no effect below this level. Different estimation methods determine that the effect of inflation on growth is robust. Our findings may be useful to central banks as a guide for inflation targeting. |
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| Keywords: | Dynamic panel threshold model Economic growth Inflation Inflation threshold |
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