Journal
JOURNAL OF ASIAN ECONOMICS
Volume 26, Issue -, Pages 31-41Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/j.asieco.2013.04.001
Keywords
Dynamic panel threshold model; Economic growth; Inflation; Inflation threshold
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This paper investigates the existence of a threshold level for inflation and how any such level affects the growth of Asian economies. We use a dynamic panel threshold growth regression, which allows for fixed effects and endogeneity. We observe a nonlinear relationship between inflation and economic growth for 32 Asian countries over the period 1980-2009. We detect an inflation threshold of approximately 5.43%, at a 1% level of significance. We find that inflation hurts growth when it exceeds 5.43% but has no effect below this level. Different estimation methods determine that the effect of inflation on growth is robust. Our findings may be useful to central banks as a guide for inflation targeting. (C) 2013 Elsevier Inc. All rights reserved.
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