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Inflation and growth: the international evidence

Author

Listed:
  • Anthony Philip Thirlwall
  • A.C. Barton

Abstract

Although in the current climate of inflation most are concerned with its negative repercussions, its virtues as a means of growth were once extolled by the likes of Robertson, Kaldor and Rostow. Moreover, the notion of growth via inflation was an attractive proposition to less developed countries in the 1950s as they sought to accelerate the growth of output in the face of inadequate voluntary saving and inelastic tax revenue. Although there are many reasons why in theory mild inflation may be conducive to growth, this hypothesis has yet to be empirically tested. The author analyses a broad cross-section of countries with growth as an independent variable. For both developed and developing countries the hypothesis is supported by the evidence. However, for the latter there is a negative relation between inflation and growth when annual rates of inflation exceed 10 percent.

Suggested Citation

  • Anthony Philip Thirlwall & A.C. Barton, 1971. "Inflation and growth: the international evidence," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 24(98), pages 263-275.
    • Handle: RePEc:psl:bnlqrr:1971:34
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    File URL: http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/10365/10263
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    Cited by:

    1. Nell, Kevin, 2023. "Inflation and growth in developing economies: A tribute to Professor Thirlwall," MPRA Paper 118757, University Library of Munich, Germany, revised 01 Sep 2023.
    2. Alexandru Minea & Patrick Villieu, 2006. "Long-Run Monetary and Fiscal Policy Trade-Off in an Endogenous Growth Model with Transaction Costs," Post-Print halshs-00261119, HAL.
    3. Minea, Alexandru & Villieu, Patrick, 2009. "Threshold effects in monetary and fiscal policies in a growth model: Assessing the importance of the financial system," Journal of Macroeconomics, Elsevier, vol. 31(2), pages 304-319, June.
    4. repec:spo:wpmain:info:hdl:2441/7182 is not listed on IDEAS
    5. Alexandru Minea & Patrick Villieu & Christophe Rault, 2008. "Further theoretical and empirical evidence on money to growth relation," Economics Bulletin, AccessEcon, vol. 5(21), pages 1-7.
    6. Ariyanto, Anto, 2017. "CRITICAL REVIEW : Inflasi dan Pertumbuhan Jangka Panjang : Sebuah Teori Baru Keynesian dan Bukti semiparametrik Lanjut," INA-Rxiv 5ydqg, Center for Open Science.
    7. 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.
    8. Alexandru Minea & Patrick Villieu, 2006. "Thresholds Effects in Monetary and Fiscal Policies in a simple Cash-in-Advance Endogenous Growth Model," Post-Print halshs-00261219, HAL.
    9. Henri Ngoa Tabi & Henri Atangana Ondoa, 2011. "Inflation, Money and Economic Growth in Cameroon," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 2(1), pages 45-56, March.
    10. Vaona, A. & Schiavo, S., 2007. "Nonparametric and semiparametric evidence on the long-run effects of inflation on growth," Economics Letters, Elsevier, vol. 94(3), pages 452-458, March.
    11. 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.
    12. Gylfason, Thorvaldur & Herbertsson, Tryggvi Thor, 2001. "Does inflation matter for growth?," Japan and the World Economy, Elsevier, vol. 13(4), pages 405-428, December.
    13. Kiliç, Cuneyt & Arica, Feyza, 2014. "Economic Freedom, Inflation Rate and their Impact on Economic Growth: A Panel Data Analysis," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 160-176, March.
    14. Kevin S. Nell, 2000. "Is Low Inflation a Precondition for Faster Growth? The Case of South Africa," Studies in Economics 0011, School of Economics, University of Kent.
    15. Ali, Sharafat, 2014. "Inflation, Income Inequality and Economic Growth in Pakistan: A Cointegration Analysis," MPRA Paper 53706, University Library of Munich, Germany.
    16. Athanasios Koulakiotis & Katerina Lyroudi & Nicholas Papasyriopoulos, 2012. "Inflation, GDP and Causality for European Countries," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 18(1), pages 53-62, February.
    17. Minea, Alexandru & Villieu, Patrick, 2010. "Financial development, institutional quality and maximizing-growth trade-off in government finance," Economic Modelling, Elsevier, vol. 27(1), pages 324-335, January.
    18. repec:ebl:ecbull:v:5:y:2008:i:21:p:1-7 is not listed on IDEAS
    19. A.P. Thirlwall, 2018. "Una vita nell’economia," Moneta e Credito, Economia civile, vol. 71(283), pages 179-210.
    20. repec:hal:spmain:info:hdl:2441/7182 is not listed on IDEAS
    21. Forgha Godfrey NJIMANTED & Daniel AKUME & Emmanuel Mbella MUKETE, 2016. "The Impact of Key Monetary Variables on the Economic Growth of the CEMAC Zone," Expert Journal of Economics, Sprint Investify, vol. 4(2), pages 54-67.
    22. Alexandru MINEA & Patrick VILLIEU, 2010. "DeVELOPPEMENT FINANCIER, QUALITe INSTITUTIONNELLE ET CROISSANCE : UN MODeLE SIMPLE AVEC EFFETS DE SEUIL," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 32, pages 31-58.

    More about this item

    Keywords

    Growth; Inflation;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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