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Inflation-Growth Nexus in Africa: Evidence from a Pooled CCE Multiple Regime Panel Smooth Transition Model

Author

Listed:
  • Reneé van Eyden

    (Department of Economics, University of Pretoria)

  • Tolga Omay

    (Cankaya University, Turkey)

  • Rangan Gupta

    (Department of Economics, University of Pretoria)

Abstract

This paper analyses the empirical relationship between inflation and growth using a panel data estimation technique, Multiple Regime Panel Smooth Transition Regression (MR-PSTR), which takes into account the nonlinearities in the data. By using a panel data set for 10 African countries that permit us to control for unobserved heterogeneity at both country and time levels, we find that a statistically significant negative relationship exists between inflation and growth for the inflation rates above the critical threshold levels of 9% and 30% which are endogenously determined. Furthermore, we remedy the cross section dependence with the Common Correlated Effects (CCE) estimator.

Suggested Citation

  • Reneé van Eyden & Tolga Omay & Rangan Gupta, 2015. "Inflation-Growth Nexus in Africa: Evidence from a Pooled CCE Multiple Regime Panel Smooth Transition Model," Working Papers 201504, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:201504
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    References listed on IDEAS

    as
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    Cited by:

    1. Ndoricimpa Arcade, 2017. "Working Paper 249 - Threshold Effects of Inflation on Economic Growth in Africa: Evidence from a Dynamic Panel Threshold Regression," Working Paper Series 2359, African Development Bank.
    2. Muhammad Azam & Saleem Khan, 2022. "Threshold effects in the relationship between inflation and economic growth: Further empirical evidence from the developed and developing world," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(4), pages 4224-4243, October.
    3. Meng Yan & Zhen An, 2017. "Foreign Direct Investment and Environmental Pollution: New Evidence from China," Econometrics Letters, Bilimsel Mektuplar Organizasyonu (Scientific letters), vol. 4(1), pages 1-17.

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    More about this item

    Keywords

    Inflation; growth; threshold effects; multiple regime panel smooth transition regression model; cross section dependence; common correlated effects;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • 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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