The Threshold Rate of Inflation and Its Relation with Economic Growth

The purpose of implementing the present research is estimating the threshold rate of inflation and its relation with economic growth in a selection of OPEC countries. Six countries of OPEC are studied for the period of 1970-2005. The method selected for the data analysis is the pooled data method. An issue addressed here is the inflation influence on economic growth and the probable symmetric effect in all its levels. Other issue that is dealt with implicitly is whether there is any significant difference among the countries under investigation. In this respect the impact of Estimation of economic growth model using generalized least squares (GLS) method and fixed effects approach indicats that inflation rate under 15% doesn’t have significant effect on the growth rate in the countries under consideration. However, inflation above this threshold level (inflation above 15%) has negative and significant effect on the economic growth. The results related to the second issue indicate that there isn’t any significant difference in the relationship between inflation and economic growth among those countries.