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Politics, Inflation, and the Mundell-Tobin Effect

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  • Edwards, Jeffrey A.

Abstract

This paper addresses the possibility of a correlation between inflation and investment for countries with inflation below 20%. The existing literature typically finds no correlation below this level of inflation. By instrumenting with an extensive set of political stability and regime variables I have shown that within a lower range of inflation rates, between 5% and 9%, this correlation is positive, highly significant, and shows no signs of reverse causality.

Suggested Citation

  • Edwards, Jeffrey A., 2006. "Politics, Inflation, and the Mundell-Tobin Effect," MPRA Paper 36443, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:36443
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    References listed on IDEAS

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    More about this item

    Keywords

    Politics; Inflation; Investment; Mundell; Tobin;
    All these keywords.

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General

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