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Welcome
Topic:

Impacts of
Inflation on
Economic
Growth

By: Najeeb
Introduction
 This paper tried to investigate the impact
of inflation on economic growth. Inflation
is a key indicator of a country &
provides important insight of the economy
& sound macroeconomic policies. There is a
consensus among many economist that a
positive relationship usually exists
between inflation & economic growth in
the short run. A moderate & Sable
inflation not only helps in economic
growth but also uplifts the poor & fixed
income segment of the society unlike high
price level that may create uncertainty &
hamper economic growth.
Definition
 Inflation is defined as a
sustained increase in the general
level of prices for goods and
services. It is measured as an
annual percentage increase. As
inflation rises, every dollar you
own buys a smaller percentage of
a good or service.

Causes & Determinants of
Inflation
 Excessive growth in the supply
money can cause inflation to
grow.
 Excess of Money printing by Govt.
 Rising in production cost.
 LabourCost raise.

Objectives of Study
 To investigate the impact of
inflation on economic growth.
 To find how inflation effect the
living standard & purchasing
power of society.
 To find how inflation effect the
business investment.
 To examine how inflation usually
leads to higher nominal interest
rates.

Literature Review
 Sweidam, Osama D, (1970-2000)” Does
inflation harm Economic growth in
Jordan”. This article releases with the
effect of inflation uncertainty on
economic growth. The overall study
shows that Jordan applied a tight
monetary policy after economic shocks
of 1980’s. This policy helps to keep
inflation stable & low. Central Bank
of Jordan adopted an easy monetary
policy to help to promote financial
market. The relationship b/w economic
growth & Inflation is negative in
Jordan but relationship b/w uncertainty
inflation & inflation is positive in
Jordan.

 Cyril. A. Ogbokar, Impact of inflation on
Namibian Growth : (1991 to 2000)”. Two
variables, Inflation & growth are used in
the article. In this article the writer
tried to analyzed the impact of inflation on
the growth of Namibia. He used methodology
to estimate the model which provides for
capturing the impact of inflation as well as
imported inflation interactively. It was
observed that when inflation is not
controlled it could have a negative
repercussion on growth & imported inflation
is visible in Namibia because industrial
activities are low in Namibian economy &
they highly depend on imported goods.
Because of low level of industrialization
activities in Namibia.

 Thereshold effects of inflation on
economic growth in developing
Countries.” This article shed new
light on r/s b/w inflation and
economics growth for developing
countries using a generalization
of Hansers (1999) Panel
Theresholdmodel by accounting for
regime intercepts. This article
reveals the importance of including
a regime intercepts from economics
and statistical prospective. This
article reveals the regime
intercepts can be crucial for
obtaining un based estimates of
both, Inflation threshold and its
Marginal effects on growth in the
various regimes.
 Max Gillman, Michal Kejak, June 19,
2003 “Contrasting Model of the
Effect of Inflation on Growth”.
This article present a general
monetary endogenous growth model
on understanding inflation and
endogenous growth with different
wages of physical and human
capitals with different exchange
technology and then categorized a
set of models a being nested
within this model.

 This article shows that weather
there is Tobin-type effect of
inflation or inflation growth
effect becomes weaker as
inflation increases a non
linearity must constant ovethe
range of inflation rate. The
article compares qualities of the
models to summarize the efficacy
of these models.

 Erman Erbaykal, H. Aydun Okuyan,
“Does Inflation depress Economic
growth? Evidence from Turkey:
(1987:- 2006: 2 periods)” In this
article the write has been
examined the relationship b/w
inflation & Economic growth. He
followed Bound Test made by
Persaran etal (2001) & Toda
Yamamoto (1995) & causality
analysis approach. Later on ARDL
models have been developed to
determine long run & short run
relationship. Whereas no
statistically long-run
relationship has been found with
the ARDL models. Short term
statistically significant
relationship has been found.

Thank You…