When Should We Worry about Inflation?

At what level should inflation be a concern? From a growth perspective, high and rising levels of inflation as in 2006–2008 raise concerns that inflation, if uncontained, could undermine growth. On the other hand, higher levels of inflation could create more space for using monetary policy to reduce...

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Main Authors:	Espinoza, Raphael, Leon, Hyginus, Prasad, Ananthakrishnan
Format:	Journal Article
Language:	en_US
Published:	Oxford University Press on behalf of the World Bank 2013
Subjects:	aggregate demand deflation disinflation exports financial crises fiscal policies fiscal policy GDP Inflation inflation rate interest rates macroeconomic policy macroeconomic stability monetary policies monetary policy monopolistic competition Phillips curve sticky prices supply curve wages
Online Access:	http://hdl.handle.net/10986/15342

id	okr-10986-15342
recordtype	oai_dc
spelling	okr-10986-153422021-04-23T14:03:22Z When Should We Worry about Inflation? Espinoza, Raphael Leon, Hyginus Prasad, Ananthakrishnan aggregate demand deflation disinflation exports financial crises fiscal policies fiscal policy GDP Inflation inflation rate interest rates macroeconomic policy macroeconomic stability monetary policies monetary policy monopolistic competition Phillips curve sticky prices supply curve wages At what level should inflation be a concern? From a growth perspective, high and rising levels of inflation as in 2006–2008 raise concerns that inflation, if uncontained, could undermine growth. On the other hand, higher levels of inflation could create more space for using monetary policy to reduce nominal and real interest rates during financial crises. A nonlinear growth regression for 165 countries over 1960–2007 shows that for developing countries, inflation above 10 percent quickly hurts growth. For advanced economies, there is no specific threshold: in the medium term, higher inflation hurts growth for any initial level of inflation, suggesting that there is a real cost to maintaining higher inflation as a buffer. 2013-08-26T16:17:54Z 2013-08-26T16:17:54Z 2012-01-18 Journal Article World Bank Economic Review 1564-698X doi:10.1093/wber/lhr043 http://hdl.handle.net/10986/15342 en_US CC BY-NC-ND 3.0 IGO http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Oxford University Press on behalf of the World Bank Journal Article
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	en_US
topic	aggregate demand deflation disinflation exports financial crises fiscal policies fiscal policy GDP Inflation inflation rate interest rates macroeconomic policy macroeconomic stability monetary policies monetary policy monopolistic competition Phillips curve sticky prices supply curve wages
spellingShingle	aggregate demand deflation disinflation exports financial crises fiscal policies fiscal policy GDP Inflation inflation rate interest rates macroeconomic policy macroeconomic stability monetary policies monetary policy monopolistic competition Phillips curve sticky prices supply curve wages Espinoza, Raphael Leon, Hyginus Prasad, Ananthakrishnan When Should We Worry about Inflation?
description	At what level should inflation be a concern? From a growth perspective, high and rising levels of inflation as in 2006–2008 raise concerns that inflation, if uncontained, could undermine growth. On the other hand, higher levels of inflation could create more space for using monetary policy to reduce nominal and real interest rates during financial crises. A nonlinear growth regression for 165 countries over 1960–2007 shows that for developing countries, inflation above 10 percent quickly hurts growth. For advanced economies, there is no specific threshold: in the medium term, higher inflation hurts growth for any initial level of inflation, suggesting that there is a real cost to maintaining higher inflation as a buffer.
format	Journal Article
author	Espinoza, Raphael Leon, Hyginus Prasad, Ananthakrishnan
author_facet	Espinoza, Raphael Leon, Hyginus Prasad, Ananthakrishnan
author_sort	Espinoza, Raphael
title	When Should We Worry about Inflation?
title_short	When Should We Worry about Inflation?
title_full	When Should We Worry about Inflation?
title_fullStr	When Should We Worry about Inflation?
title_full_unstemmed	When Should We Worry about Inflation?
title_sort	when should we worry about inflation?
publisher	Oxford University Press on behalf of the World Bank
publishDate	2013
url	http://hdl.handle.net/10986/15342
_version_	1764430990366736384

When Should We Worry about Inflation?

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