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Inflation and Economic Growth Link Multi-Country Scenario

Author

Listed:
  • Monir Ahmmed

    (Department of Economics and Banking, International Islamic University Chittagong, Bangladesh.)

  • Md. Nezum Uddin

    (Department of Economics and Banking, International Islamic University Chittagong, Bangladesh.)

  • Md. Rafiqul Islam Rafiq

    (Department of Economics and Banking, International Islamic University Chittagong, Bangladesh.)

  • Mohammed Jashim Uddin

    (Department of Economics and Banking, International Islamic University Chittagong, Bangladesh.)

Abstract

This paper inspects the intercommunication between inflation and economic growth for ten (10) selected countries using annual data series collected from World Bank Development Indicator. GDP and CPI data are used in this regard. Series are found to be stationary at level 1. Residual and Johansen Cointegration tests confirm the long-run relationship between variables. Short-run dynamics are checked by the Error Correction Model. Desired negative signs are contained in the ECT for all sequences, and absolute values are less than 1. Except for the UK data, the inflation imbalance will be adjusted by economic growth for all countries and vice versa. The ECT of India is observed to be high-0,736 and-0862, suggesting that 73% and 86% of imbalances would converge in long-term equilibrium owing to shifts in inflation and economic growth, respectively. The sensitivity of inflation to growth and vice versa varies from country to country. The study also shows that the association between inflation and economic growth is favorable for some countries and the opposite for other countries. Such outcomes lead policymakers to enact policies to regulate the economy in the context of macroeconomic management.

Suggested Citation

  • Monir Ahmmed & Md. Nezum Uddin & Md. Rafiqul Islam Rafiq & Mohammed Jashim Uddin, 2020. "Inflation and Economic Growth Link Multi-Country Scenario," International Journal of Economics and Financial Issues, Econjournals, vol. 10(4), pages 47-53.
    • Handle: RePEc:eco:journ1:2020-04-7
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    References listed on IDEAS

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    1. John Y. Campbell & Pierre Perron, 1991. "Pitfalls and Opportunities: What Macroeconomists Should Know about Unit Roots," NBER Chapters, in: NBER Macroeconomics Annual 1991, Volume 6, pages 141-220, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Monika Gupta & Shubhi Bansal, 2020. "Covid-19 Disruption of Middle-Class Monthly Household Income and Budget," International Journal of Economics and Financial Issues, Econjournals, vol. 10(6), pages 10-17.
    2. Y Ebenezer & K Jerhona Shamma, 2023. "Rate of Inflation Between India and Developed Countries in the Recent Scenario," Shanlax International Journal of Economics, Shanlax Journals, vol. 12(1), pages 27-32, December.

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    More about this item

    Keywords

    Multi-countries; Consumer Price Index; Economic growth rate; Cointegration; Error Correction Model.;
    All these keywords.

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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