Abstract
We introduce a dynamic panel threshold model to estimate inflation thresholds for long-term economic growth. Advancing on Hansen (J Econom 93:345-368, 1999) and Caner and Hansen (Econom Theory 20:813-843, 2004), our model allows the estimation of threshold effects with panel data even in case of endogenous regressors. The empirical analysis is based on a large panel-dataset including 124 countries. For industrialized countries, our results confirm the inflation targets of about 2% set by many central banks. For non-industrialized countries, we estimate that inflation rates exceeding 17% are associated with lower economic growth. Below this threshold, however, the correlation remains insignificant.
Original language | English (US) |
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Pages (from-to) | 861-878 |
Number of pages | 18 |
Journal | Empirical Economics |
Volume | 44 |
Issue number | 2 |
DOIs | |
State | Published - Apr 2013 |
Externally published | Yes |
Keywords
- Dynamicpanel threshold model
- Inflation and growth
- Inflation thresholds
ASJC Scopus subject areas
- Statistics and Probability
- Mathematics (miscellaneous)
- Social Sciences (miscellaneous)
- Economics and Econometrics