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Topic:

Impacts of Inflation on Economic Growth

By: Najeeb

Introduction This paper tried to investigate the impact of

inflation on economic growth. Inflation is a key indicator of a country & provides important insight of the economy & sound macroeconomic policies. There is a consensus among many economist that a positive relationship usually exists between inflation & economic growth in the short run. A moderate & Sable inflation not only helps in economic growth but also uplifts the poor & fixed income segment of the society unlike high price level that may create uncertainty & hamper economic growth.

Definition Inflation is defined as a sustained

increase in the general level of prices for goods and services. It is measured as an annual percentage increase. As inflation rises, every dollar you own buys a smaller percentage of a good or service.

Causes & Determinants of Inflation Excessive growth in the supply

money can cause inflation to grow. Excess of Money printing by Govt. Rising in production cost. Labour Cost raise.

Objectives of Study To investigate the impact of inflation on

economic growth. To find how inflation effect the living

standard & purchasing power of society. To find how inflation effect the business

investment. To examine how inflation usually leads

to higher nominal interest rates.

Literature Review Sweidam, Osama D, (1970-2000)” Does inflation harm

Economic growth in Jordan”. This article releases with the effect of inflation uncertainty on economic growth. The overall study shows that Jordan applied a tight monetary policy after economic shocks of 1980’s. This policy helps to keep inflation stable & low. Central Bank of Jordan adopted an easy monetary policy to help to promote financial market. The relationship b/w economic growth & Inflation is negative in Jordan but relationship b/w uncertainty inflation & inflation is positive in Jordan.

Cyril. A. Ogbokar, Impact of inflation on Namibian Growth : (1991 to 2000)”. Two variables, Inflation & growth are used in the article. In this article the writer tried to analyzed the impact of inflation on the growth of Namibia. He used methodology to estimate the model which provides for capturing the impact of inflation as well as imported inflation interactively. It was observed that when inflation is not controlled it could have a negative repercussion on growth & imported inflation is visible in Namibia because industrial activities are low in Namibian economy & they highly depend on imported goods. Because of low level of industrialization activities in Namibia.

Thereshold effects of inflation on economic growth in developing Countries.” This article shed new light on r/s b/w inflation and economics growth for developing countries using a generalization of Hansers (1999) Panel Thereshold model by accounting for regime intercepts. This article reveals the importance of including a regime intercepts from economics and statistical prospective. This article reveals the regime intercepts can be crucial for obtaining un based estimates of both, Inflation threshold and its Marginal effects on growth in the various regimes.

Max Gillman, Michal Kejak, June 19, 2003 “Contrasting Model of the Effect of Inflation on Growth”. This article present a general monetary endogenous growth model on understanding inflation and endogenous growth with different wages of physical and human capitals with different exchange technology and then categorized a set of models a being nested within this model.

This article shows that weather there is Tobin-type effect of inflation or inflation growth effect becomes weaker as inflation increases a non linearity must constant ove the range of inflation rate. The article compares qualities of the models to summarize the efficacy of these models.

Erman Erbaykal, H. Aydun Okuyan, “Does Inflation depress Economic growth? Evidence from Turkey: (1987:- 2006: 2 periods)” In this article the write has been examined the relationship b/w inflation & Economic growth. He followed Bound Test made by Persaran etal (2001) & Toda Yamamoto (1995) & causality analysis approach. Later on ARDL models have been developed to determine long run & short run relationship. Whereas no statistically long-run relationship has been found with the ARDL models. Short term statistically significant relationship has been found.

Thank You…