Investigating the Inflation–Output Nexus for the Euro Area: Old Questions and New Results
Abstract
:1. Introduction
2. Literature Review
3. Methodology
4. Data and Empirical Results
5. Conclusions
Author Contributions
Funding
Informed Consent Statement
Data Availability Statement
Conflicts of Interest
1 | It is fair to say that part of the debate centres on the “optimal level of inflation”. We refrain from any attempt to summarise this debate in this paper. |
2 | It is worth mentioning already at this stage that a number of studies have attempted to investigate the same question by focusing on the welfare costs of inflation. For a recent study see, for instance, Andrade et al. (2019). See also ECB (2021) for a comprehensive summary of the considerations underlying the last ECB’s monetary policy strategy review. |
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Authors | Period | Sample | Threshold Value |
---|---|---|---|
Sarel (1996) | 1970–1990 | 90 countries | 8% |
Khan and Senhadji (2001) | 1960–1998 | 140 countries | 3% developed countries, 12% developing countries, 9% all countries |
Mubarik (2005) | 1973–2000 | Pakistan | 9% |
Munir et al. (2009) | 1970–2005 | Malaysia | 3.89% |
Hasanov (2011) | 2001–2009 | Azerbaijan | 13% |
Akgül and Özdemir (2012) | 2003.01–2009.12 | Turkey | 1.26% |
Kremer et al. (2013) | 1950–2004 | 124 countries | 2.53% for industrialized countries, 17.23% for non-industrialized countries |
Omay and Kan (2010) | 1972–2005 | 6 developed countries | 2.52% |
Nasir and Saima (2010) | 1961–2008 | Pakistan | Two thresholds (6% and 11%) |
Vinayagathasan (2013) | 1980–2009 | 32 Asian countries | 5.43% |
Tung and Thanh (2015) | 1986–2013 | Vietnam | 7% |
Thanh (2015) | 1980–2011 | Vietnam, Indonesia, Malaysia, Philippines, Thailand | 7.84% |
Aydin and Odabasioglu (2017) | 1992–2013 | Azerbaijan, Kyrgyzstan, Kazakhstan, Uzbekistan, Turkmenistan | 7.97% |
Nepal Rastra Bank (2017) | 1978–2016 | Nepal | 6.25–6.40% depending on the estimation method |
Dholakia et al. (2021) | 1995–2018 | 58 countries | 11% for the full sample, 4.1% for advanced economies, 24.8% for emerging economies |
Variable | Inflation | Real GDP Growth |
---|---|---|
Mean | 2.74 | 1.74 |
Median | 2.25 | 1.96 |
Maximum | 10.00 | 13.44 |
Minimum | −0.37 | −15.71 |
Std. Dev. | 2.16 | 2.42 |
Skewness | 1.57 | −2.08 |
Kurtosis | 5.40 | 21.30 |
α | β | δ | γi | Threshold | Wald-Test | |
---|---|---|---|---|---|---|
Equation (11) | ||||||
Regime 1 | −1.47 (0.01) | 2.62 (0.00) | (-) | (-) | ||
Regime 2 | 2.18 (0.00) | −0.04 (0.67) | (-) | (-) | 1.91 | 33.8 (0.00) |
Equation (12) | ||||||
Regime 1 | −1.49 (0.01) | 2.44 (0.00) | −0.10 (0.08) | (-) | ||
Regime 2 | 0.83 (0.31) | 0.38 (0.16) | −0.01 (0.87) | (-) | 1.99 | 2.93 (0.09) |
Equation (13) | ||||||
Regime 1 | 1.49 (0.09) | 0.09 (0.94) | 0.08 (0.00) | |||
Regime 2 | 2.30 (0.00) | −0.10 (0.22) | 0.02 (0.01) | 1.03 | 3.39 (0.07) | |
Equation (14) | ||||||
Regime 1 | −4.26 (0.00) | 2.42 (0.00) | 0.45 (0.00) | |||
Regime 2 | 0.21 (0.55) | 0.23 (0.08) | 0.29 (0.00) | 1.91 | 8.25 (0.00) | |
Equation (15) | ||||||
Regime 1 | −3.33 (0.00) | 1.85 (0.03) | 1.78 (0.00) | |||
Regime 2 | 2.70 (0.00) | −0.12 (0.22) | −0.16 (0.35) | 1.27 | 0.80 (0.37) |
Equation | F-Statistic | LR-Ratio |
---|---|---|
(11) | 12.94 (0.00) | 24.61 (0.00) |
(12) | 4.85 (0.01) | 9.73 (0.01) |
(13) | 0.19 (0.82) | 0.40 (0.82) |
(14) | 9.73 (0.00) | 18.93 (0.00) |
(15) | 28.07 (0.00) | 49.69 (0.00) |
(a) | |||||
---|---|---|---|---|---|
Equation | (11) | (12) | (13) | (14) | (15) |
Linear part | Coefficient | Coefficient | Coefficient | Coefficient | Coefficient |
α | −0.81 (0.16) | −3.77 (0.00) | −0.66 (0.19) | −3.19 (0.00) | −1.21 (0.04) |
β | 0.31 (0.02) | 2.44 (0.00) | 0.27 (0.02) | 0.65 (0.00) | 0.36 (0.00) |
Non-linear part | Coefficient | Coefficient | Coefficient | Coefficient | Coefficient |
α | 4.87 (0.00) | 5.65 (0.00) | 4.82 (0.00) | 4.57 (0.00) | 4.76 (0.00) |
β | −0.47 (0.07) | −2.25 (0.00) | −0.65 (0.01) | −0.43 (0.21) | −0.46 (0.06) |
Non-threshold | Coefficient | Coefficient | Coefficient | Coefficient | Coefficient |
δ | −0.01 (0.98) | ||||
γ1 | (-) | (-) | 0.03 (0.00) | ||
γ2 | 0.33 (0.00) | ||||
γ3 | 0.28 (0.08) | ||||
Slope | 0.93 (0.04) | 1.08 (0.87) | 2.17 (0.03) | 1.37 (0.06) | 1.75 (0.05) |
Threshold | 2.00 (0.00) | 1.20 (0.00) | 1.86 (0.00) | 1.94 (0.00) | 1.99 (0.00) |
(b) | |||||
Linear part | Coefficient | Coefficient | Coefficient | Coefficient | Coefficient |
α | −0.81 (0.16) | (n.a.) | −0.61 (0.22) | −3.13 (0.00) | −1.17 (0.05) |
β | 0.31 (0.02) | (n.a.) | 0.26 (0.02) | 0.64 (0.00) | 0.36 (0.00) |
Non-linear part | Coefficient | Coefficient | Coefficient | Coefficient | Coefficient |
α | 4.87 (0.00) | (n.a.) | 4.70 (0.00) | 4.45 (0.00) | 4.79 (0.00) |
β | −0.47 (0.07) | (n.a.) | −0.63 (0.00) | −0.41 (0.21) | −0.47 (0.06) |
Non-threshold | Coefficient | Coefficient | Coefficient | Coefficient | Coefficient |
δ | |||||
γ1 | (-) | (n.a.) | 0.03 (0.00) | ||
γ2 | 0.33 (0.00) | ||||
γ3 | 0.28 (0.08) | ||||
Slope | 0.93 (0.04) | (n.a.) | 1.38 (0.02) | 0.86 (0.04) | 1.02 (0.03) |
Threshold | 2.01 (0.00) | (n.a.) | 1.87 (0.00) | 1.95 (0.00) | 2.04 (0.00) |
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Reimers, H.-E.; Gerdesmeier, D.; Roffia, B. Investigating the Inflation–Output Nexus for the Euro Area: Old Questions and New Results. Economies 2023, 11, 265. https://doi.org/10.3390/economies11110265
Reimers H-E, Gerdesmeier D, Roffia B. Investigating the Inflation–Output Nexus for the Euro Area: Old Questions and New Results. Economies. 2023; 11(11):265. https://doi.org/10.3390/economies11110265
Chicago/Turabian StyleReimers, Hans-Eggert, Dieter Gerdesmeier, and Barbara Roffia. 2023. "Investigating the Inflation–Output Nexus for the Euro Area: Old Questions and New Results" Economies 11, no. 11: 265. https://doi.org/10.3390/economies11110265