The Effect of Inflation on Growth: Evidence from a Panel of Transition Countries
نویسندگان
چکیده
The paper examines the e¤ect of ination on growth in transition countries. It presents panel data evidence for 13 transition countries over the 1990-2003 period; it uses a xed e¤ects, full-information maximum likelihood, panel approach to account for possible bias from correlations among the unobserved e¤ects and the observed country heterogeniety. The results nd a strong, robust, negative e¤ect of ination on growth, and one that declines in magnitude as the ination rate increases. These results include a role for a normalized money demand, by itself and as part of a nonlinearity in the ination-growth e¤ect. And these results derive from both a baseline single equation model and one that is then expanded into a three equation simultaneous system. This allows for possible simultaneity bias in the baseline model. JEL Classi cation: C23, E44, O16, O42
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