Impact of Inflation on Growth: A Panel Data Approach

摘要

This paper aims to provide some empirical evidence to show that what effects price stability will have on economic growth in the long run, to explore the channels through which inflation affects economic growth, and to investigate the desired level of inflation for different economies based on their income levels. The pooled least squares with adjustment for heteroskedasticity are used as the econometric framework; it employs panel data drawn from 213 countries over 30 years from 1980 to 2009. The results reveal that in the long run, hyperinflation economies have a comparatively lower growth rate than high-inflation economies. Highinflation economies have a lower growth rate than low-and moderate-inflation economies. The impacts that inflation has on growth can be decomposed to effects correlated and uncorrelated with investment rate and financial depth. The correlated effects show that inflation can affect economic growth by influencing investment rate and financial depth. The study also finds that the desired level of inflation rate in developing economies is higher than that in developed economies.