MONETARY POLICY, BANKING, AND GROWTH |
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| Authors: | JOSEPH H HASLAG |
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| Institution: | Sr. Economist and Policy Advisor, Federal Reserve Bank of Dallas, Tex., Phone 1–214–922–5157 Fax 1–214–922–5194 E-mail |
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| Abstract: | There is ample empirical evidence suggesting that countries with high inflation tend to grow slower than countries with low inflation. Based on the regression evidence, the inflation-rate effect is fairly large; on average, per-capita real GDP grows between 1/4- and 3/4- percentage-points slower in a country in which the average inflation rate is 10% as compared with a country in which inflation is 0%. The purpose of this paper is to determine whether a model economy that is reasonably calibrated can account for such large inflation-rate effects. The answer is yes. ( JEL O41, E58) |
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