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Non-Linearity between Inflation Rate and GDP Growth in Malaysia

Author

Listed:
  • Qaiser Munir

    (Universiti Malaysia Sabah)

  • Kasim Mansur

    (Universiti Malaysia Sabah)

Abstract

This study analyses the relationship between inflation rate and economic growth rate in the period 1970-2005 in Malaysia. A specific question that is addressed in this study is what the threshold inflation rate for Malaysia. The findings suggest that there is one inflation threshold value exist for Malaysia. This evidence strongly supports the view that the relationship between inflation rate and economic growth is nonlinear. The estimated threshold regression model suggests 3.89% as the threshold value of inflation rate above which inflation significantly retards growth rate of GDP. In addition, below the threshold level, there is statistical significant positive relationship between inflation rate and growth. Bank Negara (central bank of Malaysia) should pay attention to inflation phenomena and substantial gain can be achieved in low-inflation environment while conducting the new monetary policy.

Suggested Citation

  • Qaiser Munir & Kasim Mansur, 2009. "Non-Linearity between Inflation Rate and GDP Growth in Malaysia," Economics Bulletin, AccessEcon, vol. 29(3), pages 1555-1569.
    • Handle: RePEc:ebl:ecbull:eb-08e00020
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    References listed on IDEAS

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    Cited by:

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    2. 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.
    3. Phiri, Andrew, 2013. "Inflation and Economic Growth in Zambia: A Threshold Autoregressive (TAR) Econometric Approach," MPRA Paper 52093, University Library of Munich, Germany.
    4. Agboton, Damien Joseph, 2024. "Relation inflation-croissance dans l'Union Economique et Monétaire Ouest-Africaine (UEMOA) : Recherche d’une nouvelle preuve de causalité [Inflation-growth relationship in the West African Economic," MPRA Paper 121080, University Library of Munich, Germany.
    5. Madhu Sehrawat & A. K. Giri, 2015. "Re-examining the Threshold Effects in Inflation–Growth Nexus: Evidence from India," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 3(2), pages 57-67, Fabruary.
    6. Ambar Galih & Sugiharso Safuan, 2017. "On Nonlinear Relationship between Inflation and Economic Growth: A Study of ASEAN-5 Countries Period 2000–2016," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 63, pages 1-12, June.
    7. Amal Ben Abdallah & Sourour Guidara & Rima Aloulou & Maha Kalai & Kamel Helali, 2024. "Investigating the relationship between inflation and economic growth in Mauritania: an empirical analysis using the regime change model," SN Business & Economics, Springer, vol. 4(1), pages 1-25, January.
    8. Daniel Agyapong & Anokye Mohammed Adam & Michael Asiamah, 2016. "Macroeconomic Behaviour and Economic Growth in Ghana," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 66(4), pages 26-42, October-D.
    9. Komain JIRANYAKUL, 2017. "Estimating the Threshold Level of Inflation for Thailand," Journal of Economics Bibliography, KSP Journals, vol. 4(2), pages 150-155, June.
    10. Guo, Minjie & Lim, Eun-Son, 2024. "Does inflation targeting matter for price stability?," International Review of Economics & Finance, Elsevier, vol. 91(C), pages 1015-1032.
    11. 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.
    12. Nasir Iqbal & Saima Nawaz, 2009. "Investment, Inflation and Economic Growth Nexus," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 48(4), pages 863-874.
    13. Azimi, Mohammad Naim, 2016. "An economic growth model: Evaluating the interaction of market consumption with GDP growth rate in Afghanistan," MPRA Paper 69517, University Library of Munich, Germany, revised 11 Jan 2016.
    14. Mekki Hamdaoui & Samir Maktouf, 2019. "Overall effects of financial liberalization: financial crisis versus economic growth," International Review of Applied Economics, Taylor & Francis Journals, vol. 33(4), pages 568-595, July.
    15. Syed Jaffar Abbas & Noman Arshed, 2023. "Examining Determinants of Regional Inflation Heterogeneity — A Robust Panel Data Analysis," SAGE Open, , vol. 13(4), pages 21582440231, December.
    16. Hayat, Zafar & Balli, Faruk & Rehman, Muhammad, 2018. "Does inflation bias stabilize real growth? Evidence from Pakistan," Journal of Policy Modeling, Elsevier, vol. 40(6), pages 1083-1103.
    17. 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.
    18. Peng Su & Xiaochun Jiang & Chengbo Yang & Ting Wang & Xing Feng, 2019. "Insufficient Consumption Demand of Chinese Urban Residents: An Explanation of the Consumption Structure Effect from Income Distribution Change," Sustainability, MDPI, vol. 11(4), pages 1-22, February.
    19. Mehmet Canakci, 2021. "Does Inflation Affect Economic Growth? A case of Turkey and U.S," International Journal of Economics and Financial Issues, Econjournals, vol. 11(3), pages 45-54.
    20. Md. Sayebur Rahman, 2023. "Exploring the Impact of Inflation on Economic Development in Bangladesh," International Journal of Science and Business, IJSAB International, vol. 19(1), pages 87-96.

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    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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