Scandinavian Working Papers in Economics
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Department of Economics, Stockholm University Research Papers in Economics, Department of Economics, Stockholm University

No 2002:5:
Cyclical and Causal Patterns of Inflation and GDP Growth

Mahmood Arai (), Mats Kinnwall () and Peter Skogman Thoursie ()

Abstract: Empirical foundations for the view that high inflation impairs GDP growth are

examined using annual data for 115 countries over the period 1960-1995.

Taking into account country heterogeneity and time-specific symmetric shocks,

as well as endogeneity of inflation and dynamics of GDP growth we estimate

dynamic panel-data models of the effects of inflation on growth. We find no

evidence supporting the view that inflation is in general harmful to GDP

growth. On the other hand, there is a negative correlation between

contemporaneous intra-country inflation and growth for periods characterised

by positive oil-price shocks.

Keywords: GDP GROWTH; Inflation; (follow links to similar papers)

JEL-Codes: O11; O57; (follow links to similar papers)

25 pages, February 8, 2002

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