Inflation is the widespread and sustained increase in prices of goods and services in a country.
To measure inflation growth, we use indexes, which reflect the percentage growth of a weighted basket of goods.
Moreover, the causal relationship between these two series is studied using a more robust Granger causality test, without finding any directional causality between them.
This paper uses the cointegration technique, and finds a significant and negative long‐run relationship between inflation and economic growth for the Mexican economy.
Motivated by these questions, this present paper first examines cointegration techniques and then, threshold estimations.
This paper surveys the existing literature on the relationship between inflation and economic growth in developed and developing countries, highlighting the theoretical and empirical indications.Inflation is measured commonly by changes over time in Gross Domestic Product (GDP) deflator or Customer Price Index (CPI).GDP deflator is calculated by dividing the nominal GDP by the real GDP.CPI is calculated from the base year to another by finding the percent change in the price level from the base year to the comparison year.This is calculated by subtracting 100 from the CPI.For instance, the Mexican Central Bank could apply an expansionary monetary policy for supporting economic growth until the inflation rate does not exceed the threshold level.In fact, the threshold analysis suggests that if the inflation rate exceeds 9 percent, then Mexico's current favorable economic performance might be jeopardized. https://doi.org/10.1108/17576380911041728 Download as . Contact us if you experience any difficulty logging in.The paper shows the existence of such relationship in a cointegrated vector on economic growth (log of real gross domestic product (GDP)) and inflation rate finding a corresponding elasticity significantly negative.The study finds that the impact of inflation on economic growth varies from country to country and over time.The study also finds that the results from these studies depend on country‑specific characteristics, the data set used, and the methodology employed.