Inflation and economic growth: the search for a compromise for the Central Bank's monetary policy
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Author(s)Volodymyr MishchenkoLink to ORCID Index: https://orcid.org/0000-0002-8565-2686
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Svitlana NaumenkovaLink to ORCID Index: https://orcid.org/0000-0001-8582-6044
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Svitlana MishchenkoLink to ORCID Index: https://orcid.org/0000-0002-1840-8579
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Viktor IvanovLink to ORCID Index: https://orcid.org/0000-0003-4121-0605
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DOIhttp://dx.doi.org/10.21511/bbs.13(2).2018.13
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Article InfoVolume 13 2018, Issue #2, pp. 153-163
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The article analyzes the influence of inflation on economic growth and substantiates the main directions of increasing the effectiveness of the central bank's anti-inflation policy.
In order to determine the limit of inflation, the excess of which has a negative impact on the economic growth, the relationship is analyzed between the inflation rate and the real GDP growth rate on the basis of IMF statistics using the example of 158 countries. It was determined that in 2010–2017, in the global economy, the 6.0% inflation was the marginal value of the inflation rate, beyond which the economic growth rate declined or slowed down.
Given the inverse relationship between the inflation rate and the real GDP growth rates as well as empirical calculations for the period 1996–2017, the threshold for inflation rate for Ukraine at the level of 4.51% was determined based on empirical calculations for the 1996–2017 period. The results indicate that the National Bank of Ukraine set the inflation target above the level of the calculated threshold inflation.
It has also been established that the link between the rates of nominal GDP growth, as opposed to real GDP, and the inflation rate, is more direct and more tight. It is substantiated that to analyze such dependence it is better to use GDP deflator instead of CPI. The results indicate that deflation constrains economic growth much less than inflation.
In order to increase the effectiveness of the central bank’s pro-cyclical monetary policy aimed at supporting economic growth, the relationship between the rates of real GDP growth and the indicator characterizing the gap between the growth rates of M3 and inflation, which actually reflects the real money supply dynamics, is determined. The results obtained allowed to conclude that in 2009 and 2014-2017, the artificial “squeezing” of the money supply took place in Ukraine, resulting in a decrease in the level of the economy monetization by 22.0% in 2017 compared to 2013.
It has been proved that in order to minimize the negative impact of inflationary processes on economic growth, the policy of the National Bank of Ukraine should be aimed at eliminating the artificial squeezing of the money supply through a reasonable increase in the economy monetization and the implementation of an effective monetary policy.
- Keywords
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JEL Classification (Paper profile tab)E31, E52, E58
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References29
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Tables2
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Figures3
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- Figure 1. Graphic presentation of real GDP growth rate dependence on inflation in 158 countries of the world in 2010–2017
- Figure 2. The empirical dependence of the real GDP growth rate on the inflation rate in Ukraine according to the regression equation (1)
- Figure 3. Dynamics of the inflation rate, real GDP growth rate and the spread between the M3 growth rates and inflation rate in Ukraine in 1996–2017
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- Table 1. Grouping the countries of the world based on the GDP growth rates dependence on the inflation rate in 2010–2017
- Table 2. Dynamics of the main macroeconomic and monetary indicators in Ukraine in 1996–2017
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Impact on poverty and income inequality in Malaysia’s economic growth
Rabiul Islam ,
Ahmad Bashawir Abdul Ghani ,
Irwanshah Zainal Abidin ,
Jeya Malar Rayaiappan
doi: http://dx.doi.org/10.21511/ppm.15(1).2017.05
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Impact of inflation on economic growth: evidence from Nigeria
Anthony Olugbenga Adaramola ,
Oluwabunmi Dada
doi: http://dx.doi.org/10.21511/imfi.17(2).2020.01
Investment Management and Financial Innovations Volume 17, 2020 Issue #2 pp. 1-13 Views: 9347 Downloads: 5625 TO CITE АНОТАЦІЯIn an attempt to examine the influence of inflation on the growth prospects of the Nigerian economy, the study employs the autoregressive distributed lag on the selected variables, i.e. real gross domestic product (GDP), inflation rate, interest rate, exchange rate, degree of economy`s openness, money supply, and government consumption expenditures for the period 1980–2018. The study findings indicate that inflation and real exchange rate exert a significant negative impact on economic growth, while interest rate and money supply indicate a positive and significant impact on economic growth. Other variables in the model depict no influence on the economic growth of Nigeria. The causality result shows the unidirectional relationships between interest rate, exchange rate, government consumption expenditures and gross domestic product. However, inflation and the degree of openness show no causal relationship with gross domestic product. As a result, the study recommends that a more pragmatic effort is needed by the monetary authorities to target the inflation vigorously to prevent its adverse effect by ensuring a tolerable rate that would stimulate the economic growth of Nigeria.
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Serhiy Kozmenko ,
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doi: http://dx.doi.org/10.21511/afc.01(1).2017.06
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