Inflation, inflation uncertainty, and economic growth in emerging and developing countries: panel data evidence
This paper investigates the relationship between inflation, inflation uncertainty, and economic growth in a panel of 94 emerging and developing countries. Based on the system generalized method of moments (SGMM) that controls for instrument proliferation, we discover the following results. First, wh...
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| Format: | Article |
| Language: | English |
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Elsevier
2016
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| Online Access: | http://psasir.upm.edu.my/id/eprint/54556/ http://psasir.upm.edu.my/id/eprint/54556/1/Inflation%2C%20inflation%20uncertainty%2C%20and%20economic%20growth%20in%20emerging%20and%20developing%20countries.pdf |
| _version_ | 1848852578030321664 |
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| author | Baharumshah, Ahmad Zubaidi Mohd Ali, Ly Slesman @ Sulaiman Wohar, Mark E. |
| author_facet | Baharumshah, Ahmad Zubaidi Mohd Ali, Ly Slesman @ Sulaiman Wohar, Mark E. |
| author_sort | Baharumshah, Ahmad Zubaidi |
| building | UPM Institutional Repository |
| collection | Online Access |
| description | This paper investigates the relationship between inflation, inflation uncertainty, and economic growth in a panel of 94 emerging and developing countries. Based on the system generalized method of moments (SGMM) that controls for instrument proliferation, we discover the following results. First, when both the proliferation of instruments problem and the biased standard error in SGMM are accounted for, the results reveal that only in non-inflation crisis countries does inflation harm growth, while inflation uncertainty promotes growth. Empirical results, based on a three-regime model, confirm the negative growth effect of high inflation rates and the growth enhancing effect of low inflation. Second, the negative-level effect of not keeping inflation in check outweighs the positive effect from uncertainty in non-inflation crisis countries in all three regimes. Third, the existence of a positive effect of uncertainty about the inflation rate on growth through a precautionary motive is confirmed when inflation reaches moderate ranges (5.6–15.9%). These findings are robust, although only for non-inflation crisis countries, to a battery of diagnostic tests, including the issue of weak and the proliferation of instruments and biased standard error. |
| first_indexed | 2025-11-15T10:40:18Z |
| format | Article |
| id | upm-54556 |
| institution | Universiti Putra Malaysia |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-15T10:40:18Z |
| publishDate | 2016 |
| publisher | Elsevier |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | upm-545562018-03-29T00:54:19Z http://psasir.upm.edu.my/id/eprint/54556/ Inflation, inflation uncertainty, and economic growth in emerging and developing countries: panel data evidence Baharumshah, Ahmad Zubaidi Mohd Ali, Ly Slesman @ Sulaiman Wohar, Mark E. This paper investigates the relationship between inflation, inflation uncertainty, and economic growth in a panel of 94 emerging and developing countries. Based on the system generalized method of moments (SGMM) that controls for instrument proliferation, we discover the following results. First, when both the proliferation of instruments problem and the biased standard error in SGMM are accounted for, the results reveal that only in non-inflation crisis countries does inflation harm growth, while inflation uncertainty promotes growth. Empirical results, based on a three-regime model, confirm the negative growth effect of high inflation rates and the growth enhancing effect of low inflation. Second, the negative-level effect of not keeping inflation in check outweighs the positive effect from uncertainty in non-inflation crisis countries in all three regimes. Third, the existence of a positive effect of uncertainty about the inflation rate on growth through a precautionary motive is confirmed when inflation reaches moderate ranges (5.6–15.9%). These findings are robust, although only for non-inflation crisis countries, to a battery of diagnostic tests, including the issue of weak and the proliferation of instruments and biased standard error. Elsevier 2016-12 Article PeerReviewed text en http://psasir.upm.edu.my/id/eprint/54556/1/Inflation%2C%20inflation%20uncertainty%2C%20and%20economic%20growth%20in%20emerging%20and%20developing%20countries.pdf Baharumshah, Ahmad Zubaidi and Mohd Ali, Ly Slesman @ Sulaiman and Wohar, Mark E. (2016) Inflation, inflation uncertainty, and economic growth in emerging and developing countries: panel data evidence. Economic Systems, 40 (4). pp. 638-657. ISSN 0939-3625 https://www.sciencedirect.com/science/article/pii/S0939362516300735 Economic growth; Inflation; Inflation uncertainty; Three-regime model 10.1016/j.ecosys.2016.02.009 |
| spellingShingle | Economic growth; Inflation; Inflation uncertainty; Three-regime model Baharumshah, Ahmad Zubaidi Mohd Ali, Ly Slesman @ Sulaiman Wohar, Mark E. Inflation, inflation uncertainty, and economic growth in emerging and developing countries: panel data evidence |
| title | Inflation, inflation uncertainty, and economic growth in emerging and developing countries: panel data evidence |
| title_full | Inflation, inflation uncertainty, and economic growth in emerging and developing countries: panel data evidence |
| title_fullStr | Inflation, inflation uncertainty, and economic growth in emerging and developing countries: panel data evidence |
| title_full_unstemmed | Inflation, inflation uncertainty, and economic growth in emerging and developing countries: panel data evidence |
| title_short | Inflation, inflation uncertainty, and economic growth in emerging and developing countries: panel data evidence |
| title_sort | inflation, inflation uncertainty, and economic growth in emerging and developing countries: panel data evidence |
| topic | Economic growth; Inflation; Inflation uncertainty; Three-regime model |
| url | http://psasir.upm.edu.my/id/eprint/54556/ http://psasir.upm.edu.my/id/eprint/54556/ http://psasir.upm.edu.my/id/eprint/54556/ http://psasir.upm.edu.my/id/eprint/54556/1/Inflation%2C%20inflation%20uncertainty%2C%20and%20economic%20growth%20in%20emerging%20and%20developing%20countries.pdf |