The study is geared towards achieving the following objectives; to estimate the impact of Inflation on economic growth, determine the extent of long-run relationship between inflation and economic growth. R-squared showed that The Breusch-Godfrey serial correlation LM P-value implies that there is evidence of auto correlation in the model; while the F-statistics of its
The huge empirical studies about the correlation between inflation and economic growth have been conducted to support the inflation-growth theories but they come out with inconclusive results.
Though, even if there is some common or similar findings the relationship between two variables still a controversial? According to available studies the relationship between inflation and economic growth can be linear or nonlinear.
If the relationship is linear what is its nature? Or if it is nonlinear what can be the structural break point of inflation? This particular study aims to review the literature related to the relationship between inflation and economic growth and identify the gaps for further research.
Theoretical framework on the inflation-growth nexus remains controversial one. The early theories from Mundell and Tobin have suggested a positive relationship between inflation and economic growth. They argued that investment and real money balance are substitutes.
Contrary to Tobin and Mundell, Stockman has proved that inflation has a negative impact on economic growth. Stockman assumed that investment and real money balance are complements. Sidrauski by assuming the super neutrality of money; he found no relationship between inflation and economic growth.
Monetarists agree that inflation occurs if money supply grows more than economic growth rates. According to them, inflation is a monetary phenomenon and to deal with it government should use monetary policies that decrease money supply.
In addition, decreasing money supply leads to increase in unemployment rate which leads to decrease in economic growth; inflation is detrimental to economic growth Snowdon and Vane, The structuralists argue that inflation is important for growth in developing countries Guru, The endogenous growth theory has raised argument that inflation has negative effects on economic growth through human capital taxation Lucas, The empirical works on the relationship between inflation and economic growth are summarized in the Table 1.
Empirical works on the relationship between inflation and economic growth 2 Author s Title Objectives Data and Estimation techniques Wai The relation between inflation and economic.Impact of Inflation on Economic Growth: Case Study of Nigeria () scope and quality as a thesis for the degree of Master of Science in Economics.
Assoc. Prof. Dr. Sevin Uğural economic growth. Inflation at a low level is necessary for economic growth. near east university graduate school of social sciences economics master’s programme master’s thesis the impact of inflation on economic growth: evidence of malaysia from. This essay will provide a unique perspective regarding the impact of economic growth and the importance of economic growth.
This essay will also provide the argument of the research found that will provide how economic growth can lead to increased prosperity in the developed, the .
hampers economic growth, otherwise inflation has a favorable impact on growth. The authors explained this phenomenon using the so-called “adverse selection mechanism” in credit market.
important that we know how impact inflation has on economic growth and at what level of inflation we can positively manage our economic growth. Objective of the Study.
The objective of this study is to examine the impact of inflation on economic growth in Pakistan. Analysis: The relationship between inflation and economic growth. Definitions and concepts.
Before we start to our analysis about inflation and economic growth relationships, it needs some descriptions, as to what inflation is and what economic growth, as the starting point.