In Blockination, Volatility and Growth

This paper re-examines the relationship between in ation, in ation volatility and growth using cross-country panel data for the past 30 years. With regard to the level of in ation, we nd that in contrast to current ndings which are based on cross-sectional time-average regression comparisons, exploiting the time dimension of the data reveals a strong negative correlation between in ation and income growth for all but very low in ation countries. To examine the role of in ation uncertainty on growth, we use intra-year in ation data to construct an annual measure of in ation volatility. Using this measure, we nd that in ation volatility is also robustly negatively correlated with growth even after the e ect of the level of in ation is controlled for.