May 13, 2010 Reading Time: < 1 minute

“While few doubt that very high inflation is bad for growth, there is less agreement about the effects of moderate inflation. Using panel regressions and allowing for a nonlinear specification, this paper finds a statistically and economically significant negative relationship between inflation and growth, which holds robustly at all but the lowest inflation rates. A “decision-tree” technique identifies inflation as one of the most important determinants of growth. Finally, short-run growth costs of disinflation are only relevant for the most severe disinflations, or when the initial inflation rate is well within the single-digit range.” Read more.

 “Warning: Inflation May Be Harmful to Your Growth” 
Atish Ghosh and Steven Phillips 
Staff Papers – International Monetary Fund, Vol. 45, No. 4 (Dec., 1998), pp. 672-710.
 
Image by renjith krishman / FreeDigitalPhotos.net.

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