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Estimating threshold level of inflation in Swaziland: inflation and growth

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  • Mosikari, Teboho Jeremiah
  • Eita, Joel Hinaunye

Abstract

The objective of this study is to estimate optimal threshold effect of inflation for the economy of Swaziland. The study applied the liner OLS and Two-Stage least squares (2SLS) methods to determine the optimal effect of inflation on growth. It used annual data for the period 1980 to 2015. The results of liner OLS method show that the estimated optimal threshold level is at 12%. The results show that inflation rate beyond optimal level of 12% decrease growth by 1.02%. Similar results were also found in applying 2SLS method, where inflation exerted a negative impact beyond threshold point by 18.5%. These findings on Swaziland economy have crucial implications for monetary policy makers in terms of keeping inflation below the threshold point to sustain a positive economic growth in the long run.

Suggested Citation

  • Mosikari, Teboho Jeremiah & Eita, Joel Hinaunye, 2018. "Estimating threshold level of inflation in Swaziland: inflation and growth," MPRA Paper 88728, University Library of Munich, Germany, revised 29 Aug 2018.
    • Handle: RePEc:pra:mprapa:88728
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    References listed on IDEAS

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    1. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    2. Vinayagathasan, Thanabalasingam, 2013. "Inflation and economic growth: A dynamic panel threshold analysis for Asian economies," Journal of Asian Economics, Elsevier, vol. 26(C), pages 31-41.
    3. 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.
    4. 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.
    5. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    6. Sala-i-Martin, Xavier, 1997. "I Just Ran Two Million Regressions," American Economic Review, American Economic Association, vol. 87(2), pages 178-183, May.
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    Cited by:

    1. Wilfred E. Mbowe & Hossana P. Mpango, 2024. "Re-Estimating Inflation Threshold Level for Tanzania," Applied Economics and Finance, Redfame publishing, vol. 11(2), pages 34-50, December.

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    More about this item

    Keywords

    economic growth; inflation; threshold level;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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