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Threshold Modeling for Inflation and GDP Growth

Author

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  • Nazir, Sidra
  • Saeed, Saira
  • Muhammad, Atta

Abstract

The study has evaluated the relationship between the inflation rate and GDP growth of Pakistan using the annual data of inflation rate and GDP growth since 1972 to 2016 for Pakistan. The paper has used the different techniques like; OLS, FMOLS, TAR and dummy method threshold model, to estimate the true relationship between the concerned variables based on the previous studies those gives mixed results. The study has concluded the positive relationship between the inflation rate and economic growth of Pakistan at 5.5% to 9% threshold level of inflation and confirmed the nonlinear relationship between them. And low and double figure inflation rate are considered to have adverse effect on the economic growth of the Pakistan. So to stimulate the stable economic growth of Pakistan we need to have medium rate of inflation.

Suggested Citation

  • Nazir, Sidra & Saeed, Saira & Muhammad, Atta, 2017. "Threshold Modeling for Inflation and GDP Growth," MPRA Paper 79649, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:79649
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    References listed on IDEAS

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    Cited by:

    1. Drobyshevsky, Sergey M. (Дробышевский, Сергей) & Trunin, Pavel V. (Трунин, Павел) & Sinelnikova-Muryleva, Elena V. (Синельникова-Мурылева, Елена) & Makeeva, Natalja V. (Макеева, Наталья) & Grebenkina,, 2020. "Optimal Inflation in Russia: Theory and Practice [Оптимальная Инфляция В России: Теория И Практика]," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 4, pages 8-29, August.
    2. E. Sinelnikova-Muryleva V. & A. Grebenkina M. & Е. Синельникова-Мурылева В. & А. Гребенкина М., 2019. "Оптимальная инфляция и инфляционное таргетирование: страновой опыт // Optimal Inflation and Inflation Targeting: International Experience," Финансы: теория и практика/Finance: Theory and Practice // Finance: Theory and Practice, ФГОБУВО Финансовый университет при Правительстве Российской Федерации // Financial University under The Government of Russian Federation, vol. 23(1), pages 49-65.

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    More about this item

    Keywords

    Inflation rate; GDP growth; threshold level; nonlinear relationship;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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