Download Free Inflation And The Growth Rate Of Output Book in PDF and EPUB Free Download. You can read online Inflation And The Growth Rate Of Output and write the review.

This paper shows that inflation has depended strongly on the growth rate of output for most of the twentieth century. Only in recent years has the deviation of output from trend become the predominant determinant of price behavior. The paper also shows that the growth rate effect works primarily through materials prices, and that the declining importance of materials can explain why the growth rate effect has weakened over time. Finally, the paper shows that the growth rate effect can explain why prices rose in the mid- and late- 1930s despite the fact that output was substantially below trend.
Cross-country regressions explaining output growth often obtain a negative effect from inflation. However, that result is not robust, due to the selection of countries in sample, temporal aggregation, and omission of consequential variables in levels. This paper demonstrates some implications of these mis-specifications, both analytically and empirically. In particular, for most G-7 countries, annual time series of inflation and the log-level of output are cointegrated, thus rejecting the existence of a long-run relation between output growth and inflation. Typically, output and inflation are positively related in these cointegrating relationships: a price markup model helps interpret this surprising feature.
Publisher Description
Controlling inflation is among the most important objectives of economic policy. By maintaining price stability, policy makers are able to reduce uncertainty, improve price-monitoring mechanisms, and facilitate more efficient planning and allocation of resources, thereby raising productivity. This volume focuses on understanding the causes of the Great Inflation of the 1970s and ’80s, which saw rising inflation in many nations, and which propelled interest rates across the developing world into the double digits. In the decades since, the immediate cause of the period’s rise in inflation has been the subject of considerable debate. Among the areas of contention are the role of monetary policy in driving inflation and the implications this had both for policy design and for evaluating the performance of those who set the policy. Here, contributors map monetary policy from the 1960s to the present, shedding light on the ways in which the lessons of the Great Inflation were absorbed and applied to today’s global and increasingly complex economic environment.
Estimates of potential output and the neutral short-term interest rate play important roles in policy making. However, such estimates are associated with significant uncertainty and subject to significant revisions. This paper extends the structural multivariate filter methodology by adding a monetary policy block, which allows estimating the neutral rate of interest for the U.S. economy. The addition of the monetary policy block further improves the reliability of the structural multivariate filter.
This paper investigates various long-run relationships among the level and variability of money growth, inflation and real output growth using cross-section analysis based on 90 countries' time series data. The empirical results presented in this paper support the hypothesis that the variability of inflation is positively related to the level of inflation, and also suggest the existence of the threshold level of inflation for the sample period of the 1980s and early 1990s. The results also show that inflation variability appears to have insignificant relationships with the long-run average growth rate of real output overall. The positive relationship between two variables prevails during the 1970s, but this relationship weakens considerably during the 1980s and early 1990s. The OECD group has consistently positive slope coefficients for all considered sample periods. The empirical results of this paper also confirm the well-known proposition that money is very closely related to the rate of inflation, And, overall, the growth rate of money supply does not seem to have strong relationship with the long-run real output growth rate. However, the OECD group shows weak positive relationship between two variables, which appears to be the result of relatively strong positive correlation especially during the 1970s. For the Asian group, one of the fastest economic growth groups, the growth rate of money supply does not have one-for-one relationship with inflation, and has strong positive relationship with real output growth. This paper does not support the proposition of a significant negative relationship between the variability of money growth and the average growth rate of real output. However, especially after 1980, the relationship changes to negative. The evidence presented in this paper shows that both the level or variability of inflation and the level or variability of money growth has positive relationship with the variability of real output growth. This result suggests that we may have to consider an additional welfare cost of high inflation or high money growth (and high variability of those) since they tend to induce unstable economic growth pattern even though they play no important role on the determination of the long-run average growth rate of real output.
This paper reexamines growth in transition using panel data to 1997. It suggests that output has been strongly affected by export market growth; that inflation has been associated with weaker output only above a threshold inflation rate; that structural reform has been associated with weaker output initially, but that it stimulates higher growth thereafter; and that rapid disinflation has been associated with output losses only in the presence of pegged exchange rates.