Inflation, Disinflation, and Growth

44 Pages Posted: 15 Feb 2006

See all articles by Atish R. Ghosh

Atish R. Ghosh

International Monetary Fund (IMF) - Policy Development and Review Department

Steven Phillips

International Monetary Fund (IMF) - Western Hemisphere Department

Date Written: May 1998

Abstract

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.

Keywords: inflation, growth determinants, growth regressions, robustness

JEL Classification: E31, O40

Suggested Citation

Ghosh, Atish R. and Phillips, Steven, Inflation, Disinflation, and Growth (May 1998). IMF Working Paper No. 98/68, Available at SSRN: https://ssrn.com/abstract=882344

Atish R. Ghosh (Contact Author)

International Monetary Fund (IMF) - Policy Development and Review Department ( email )

700 19th St. NW
Washington, DC 20431
United States

Steven Phillips

International Monetary Fund (IMF) - Western Hemisphere Department ( email )

700 19th Street NW
Washington, DC 20431
United States

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