IDEAS home Printed from https://ideas.repec.org/a/bla/sajeco/v88y2020i4p536-550.html
   My bibliography  Save this article

Non‐linear Effects of Inflation on Economic Growth in the Democratic Republic of the Congo

Author

Listed:
  • Boniface Yemba
  • Erick Kitenge
  • Paul Woodburne

Abstract

This paper presents one of the first empirical studies that employ the regression kink model with an unknown threshold to estimate the turning point in the relationship between inflation and economic growth. To deal with the asymptotic non‐normality of the regression function, we use a numerical delta bootstrap method and inference methods in the construction of confidence intervals for the regression function. Our estimated threshold suggests that, in the Democratic Republic of Congo, inflation rates lower than 17.2% would drive economic growth, but any inflation rate beyond that threshold will harm the growth. The Congolese policymakers should be aware of this threshold in the implementation of any inflation‐targeting policy instruments or strategies.

Suggested Citation

  • Boniface Yemba & Erick Kitenge & Paul Woodburne, 2020. "Non‐linear Effects of Inflation on Economic Growth in the Democratic Republic of the Congo," South African Journal of Economics, Economic Society of South Africa, vol. 88(4), pages 536-550, December.
    • Handle: RePEc:bla:sajeco:v:88:y:2020:i:4:p:536-550
    DOI: 10.1111/saje.12249
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/saje.12249
    Download Restriction: no
    File URL: https://libkey.io/10.1111/saje.12249?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. By Mohsin S. Khan & Abdelhak S. Senhadji, 2001. "Threshold Effects in the Relationship Between Inflation and Growth," IMF Staff Papers, Palgrave Macmillan, vol. 48(1), pages 1-1.
    2. Stephanie Kremer & Alexander Bick & Dieter Nautz, 2013. "Inflation and growth: new evidence from a dynamic panel threshold analysis," Empirical Economics, Springer, vol. 44(2), pages 861-878, April.
    3. Seleteng, Monaheng & Bittencourt, Manoel & van Eyden, Reneé, 2013. "Non-linearities in inflation–growth nexus in the SADC region: A panel smooth transition regression approach," Economic Modelling, Elsevier, vol. 30(C), pages 149-156.
    4. Kazeem Bello Ajide & Olukemi Lawanson, 2012. "Inflation Thresholds and Economic Growth: Evidence from Nigeria," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 2(7), pages 876-901, November.
    5. Mr. Jean-Claude Nachega, 2005. "Fiscal Dominance and Inflation in the Democratic Republic of the Congo," IMF Working Papers 2005/221, International Monetary Fund.
    6. repec:ilo:ilowps:464250 is not listed on IDEAS
    7. Anwar, Sarah. & Islam, Iyanatul,, 2011. "Should developing countries target low, single digit inflation to promote growth and employment," ILO Working Papers 994642503402676, International Labour Organization.
    8. Kazeem Bello Ajide & Olukemi Lawanson, 2012. "Inflation Thresholds and Economic Growth: Evidence from Nigeria," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 2(7), pages 876-901.
    9. Mr. Atish R. Ghosh & Mr. Steven T Phillips, 1998. "Inflation, Disinflation, and Growth," IMF Working Papers 1998/068, International Monetary Fund.
    10. Fischer, Stanley, 1993. "The role of macroeconomic factors in growth," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 485-512, December.
    11. Yasir Ali Mubarik, 2005. "Inflation and Growth: An Estimate of the Threshold Level of Inflation in Pakistan," SBP Working Paper Series 08, State Bank of Pakistan, Research Department.
    12. Bick, Alexander, 2010. "Threshold effects of inflation on economic growth in developing countries," Economics Letters, Elsevier, vol. 108(2), pages 126-129, August.
    13. FABAYO, Joseph Ademola & AJILORE, Olubanjo Taiwo, 2006. "Inflation: How Much Is Too Much For Economic Growth in Nigeria," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 41(2), pages 129-147, December.
    14. Jean-Baptiste Nkume, 2014. "Optimal Inflation Threshold for Economic Growth in Malawi," Journal of Economics and Behavioral Studies, AMH International, vol. 6(12), pages 933-946.
    15. Bruce E. Hansen, 2017. "Regression Kink With an Unknown Threshold," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 35(2), pages 228-240, April.
    16. Ndoricimpa Arcade, 2017. "Working Paper 249 - Threshold Effects of Inflation on Economic Growth in Africa: Evidence from a Dynamic Panel Threshold Regression," Working Paper Series 2359, African Development Bank.
    17. Roberto M. Billi & George A. Kahn, 2008. "What is the optimal inflation rate?," Economic Review, Federal Reserve Bank of Kansas City, vol. 93(Q II), pages 5-28.
    18. Phiri, Andrew, 2013. "Inflation and Economic Growth in Zambia: A Threshold Autoregressive (TAR) Econometric Approach," MPRA Paper 52093, University Library of Munich, Germany.
    19. Nicas Yabu & Nicholaus J. Kessy, 2015. "Appropriate Threshold Level of Inflation for Economic Growth: Evidence from the Three Founding EAC Countries," Applied Economics and Finance, Redfame publishing, vol. 2(3), pages 127-144, August.
    20. Hasanov, Fakhri, 2011. "Relationship between inflation and economic growth in Azerbaijani economy: is there any threshold effect?," MPRA Paper 33494, University Library of Munich, Germany.
    21. Peter Christoffersen & Peter Doyle, 2000. "From Inflation to Growth," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 8(2), pages 421-451, July.
    22. Yasir Ali Mubarik, 2005. "Inflation and Growth: An Estimate of the Threshold Level of Inflation in Pakistan," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 1, pages 35-44.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ndoricimpa Arcade, 2017. "Working Paper 249 - Threshold Effects of Inflation on Economic Growth in Africa: Evidence from a Dynamic Panel Threshold Regression," Working Paper Series 2359, African Development Bank.
    2. Mothuti Gosego & Phiri Andrew, 2018. "Inflation-Growth Nexus in Botswana: Can Lower Inflation Really Spur Growth in the Country?," Global Economy Journal, De Gruyter, vol. 18(4), pages 1-11, December.
    3. Manamba EPAPHRA, 2016. "Nonlinearities in Inflation and Growth Nexus: The Case of Tanzania," Journal of Economics and Political Economy, KSP Journals, vol. 3(3), pages 471-512, September.
    4. EKINCI, Ramazan & TUZUN,Osman & CEYLAN, Fatih, 2020. "The Relationship Between Inflation And Economic Growth: Experiences Of Some Inflation Targeting Countries," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 24(1), pages 6-20, March.
    5. Muhammad Azam & Saleem Khan, 2022. "Threshold effects in the relationship between inflation and economic growth: Further empirical evidence from the developed and developing world," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(4), pages 4224-4243, October.
    6. Sanga,Dimitri & Gui-Diby,Steve Loris, 2020. "Inflation Threshold Levels and Economic Growth in the Franc Zone Countries," Policy Research Working Paper Series 9405, The World Bank.
    7. Mavikela Nomahlubi & Mhaka Simba & Phiri Andrew, 2019. "The Inflation-Growth Relationship in SSA Inflation-Targeting Countries," Studia Universitatis Babeș-Bolyai Oeconomica, Sciendo, vol. 64(2), pages 84-102, August.
    8. Andrew Phiri, 2020. "Endogenous monetary approach to optimal inflation–growth nexus in Swaziland," African Journal of Economic and Management Studies, Emerald Group Publishing Limited, vol. 11(4), pages 559-571, March.
    9. Nawalage S. Cooray, 2013. "An Empirical Analysis of Inflation-Growth Nexus in Developing Countries: The Case of Sri Lanka," Working Papers EMS_2013_21, Research Institute, International University of Japan.
    10. repec:asi:ajoerj:2013:p:363-380 is not listed on IDEAS
    11. Waseem Khadim & Saddam Ilyas & Bilal Mehmood, 2016. "Of Inflation and Growth Nexus in BRIMC Economies," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 4(1), pages 32-45, January.
    12. Phiri, Andrew, 2013. "Inflation and Economic Growth in Zambia: A Threshold Autoregressive (TAR) Econometric Approach," MPRA Paper 52093, University Library of Munich, Germany.
    13. Ndoricimpa, Arcade & Osoro, Nehemiah & Kidane, Asmerom, 2016. "Threshold effects of inflation on economic growth in selected African regional economic communities: Evidence from a dynamic panel threshold modeling," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 41, pages 5-23.
    14. Celil AYDIN, 2017. "The Inflation-Growth Nexus: A Dynamic Panel Threshold Analysis For D-8 Countries," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 134-151, December.
    15. Gerdesmeier, Dieter & Reimers, Hans-Eggert & Roffia, Barbara, 2023. "Investigating the inflation-output-nexus for the euro area: Old questions and new results," Wismar Discussion Papers 01/2023, Hochschule Wismar, Wismar Business School.
    16. Raphael Espinoza & Hyginus Leon & Ananthakrishnan Prasad, 2012. "When Should We Worry about Inflation?," The World Bank Economic Review, World Bank, vol. 26(1), pages 100-127.
    17. Joseph Magnus Frimpong & Eric Fosu Oteng-Abayie, 2010. "When is Inflation Harmful? Estimating the Threshold Effect for Ghana," American Journal of Economics and Business Administration, Science Publications, vol. 2(3), pages 232-239, September.
    18. Goodness C. Aye & Nicholas M. Odhiambo, 2021. "Threshold Effect of Inflation on Agricultural Growth: Evidence from Developing Countries," Advances in Decision Sciences, Asia University, Taiwan, vol. 25(2), pages 28-50, June.
    19. Richard Ayisi, 2013. "Single-Digit Inflation Targeting and Economic Growth," American Journal of Economics and Business Administration, Science Publications, vol. 5(1), pages 22-28, September.
    20. Thouraya BOUJELBENE, 2021. "Nonlinearity Relationship of Inflation and Economic Growth: Role of Institutions Quality," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 166-179, December.
    21. Jean-Baptiste Nkume, 2014. "Optimal Inflation Threshold for Economic Growth in Malawi," Journal of Economics and Behavioral Studies, AMH International, vol. 6(12), pages 933-946.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:sajeco:v:88:y:2020:i:4:p:536-550. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/essaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.