Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/333578 
Year of Publication: 
2025
Series/Report no.: 
Working Papers in Economics and Management No. 06-2025
Publisher: 
Bielefeld University, Faculty of Business Administration and Economics, Bielefeld
Abstract: 
This paper empirically studies the relationship between economic growth and inflation for a selected group of emerging market economies. We applied panel linear estimators, namely, static fixed effects and a dynamic GMM estimator to a sample of 31 countries. Our preliminary results point to the negative impact of inflation on economic growth. We further relaxed the linearity assumption and applied a dynamic threshold GMM model where the threshold variable (inflation) and other regressors are considered endogenous. Our subsequent results indicate that it is reasonable to distinguish between different inflation regimes, as we find a positive impact of inflation on economic growth in a low inflation regime. In contrast, high inflation exerts a negative effect on growth. Thus, we claim that inflation is not harmful to economic growth per se, but it needs to be considered in which inflation regime/situation the economy is situated. We find a threshold of about 2% above which inflation harms the economy.
Subjects: 
Economic Growth
Inflation
Emerging Markets
Panel Estimations
Panel threshold models
JEL: 
O47
E31
Persistent Identifier of the first edition: 
Creative Commons License: 
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Document Type: 
Working Paper

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