Moderate inflation and the deflation-depression link

Jess Benhabib, Mark M. Spiegel

    Research output: Contribution to journalArticle

    Abstract

    Recent research has concluded that the historical evidence only provides weak support for the contention that deflation episodes are harmful to economic growth. In this paper, we revisit this relationship by allowing for inflation and growth to have a nonlinear specification dependent on inflation levels. In particular, we allow for the possibility that high inflation is negatively correlated with growth, while a positive relationship exists over the range of negative to moderate inflation. Our results confirm a positive relationship between inflation and growth at moderate inflation levels, and support the contention that the relationship between inflation and growth is nonlinear over the entire sample range.

    Original languageEnglish (US)
    Pages (from-to)787-798
    Number of pages12
    JournalJournal of Money, Credit and Banking
    Volume41
    Issue number4
    DOIs
    StatePublished - Jun 1 2009

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    Keywords

    • Deflation
    • Depression
    • Empirics
    • Growth
    • Inflation

    ASJC Scopus subject areas

    • Accounting
    • Finance
    • Economics and Econometrics

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