Inflation – Economic Growth Nexus: Evidence from OECD Countries

Kırşanlı F.

Journal of emerging economies and policy (Online), cilt.7, sa.2, ss.389-398, 2022 (Hakemli Dergi)

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 7 Sayı: 2
  • Basım Tarihi: 2022
  • Dergi Adı: Journal of emerging economies and policy (Online)
  • Derginin Tarandığı İndeksler: TR DİZİN (ULAKBİM)
  • Sayfa Sayıları: ss.389-398
  • Yozgat Bozok Üniversitesi Adresli: Evet

Özet

This paper investigates the impact of inflation on economic growth in 38 Organization for Economic Cooperation and Development (OECD) countries from 1972-2021. The results confirm that inflation harms economic growth with various specifications using the generalized method of moments (GMM) to overcome endogeneity and reverse causality issues. One percent increase in inflation reduces growth by 0.03-0.15 percent depending on the model. The results are robust with numerous control variables. For further robustness, difference GMM and fixed effect (FE) regressions are utilized, and they verify the system GMM results that inflation has adverse effects on growth. Thus, policymakers should implement specific policies to prevent the spread of inflation in the long run.