Abstract
This paper investigates the effects of inflation on per capita income growth for 36 developed and developing countries by using structural vector autoregression models that are robust to the consideration of endogeneity by construction. The results show evidence for heterogeneity of such effects across countries that are shown to be further connected to the strength of their institutions. While the effects of inflation on growth are negative and significant in countries with stronger institutions, they are positive and significant in countries with weaker institutions.
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Notes
The number of lags, which is one year, has been determined by comparing the log 10 of the marginal likelihood of the estimated models with one to ten lags.
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The author would like to thank the editor, James Payne, and an anonymous referee for their helpful comments and suggestions. The usual disclaimer applies.
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Appendix
Appendix
Institutions for 1996 versus 2017. Worldwide Governance Indicators (as of October 4, 2019)
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Yilmazkuday, H. Inflation and growth: the role of institutions. J Econ Finan 46, 167–187 (2022). https://doi.org/10.1007/s12197-021-09563-7
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DOI: https://doi.org/10.1007/s12197-021-09563-7