Economic growth and Inflation : A panel data analysis

Abstract

One of the most important objectives for any countries is to sustain high economic growth. Even though there are main factors that affect economic growth, the concern of this paper is only about inflation. The relationship between economic growth and inflation is debatable. The first objective of this study is to investigate the relationship between inflation and economic growth. This study uses panel data which includes 13 SSA countries from 1969 to 2009. To analyze the data the model is formed by taking economic growth as dependent variable and four variables (i.e. inflation, investment, population and initial GDP) as independent variables. The result indicates that there is a negative relationship between economic growth and inflation. This study is also examined the causality relationship between economic growth and inflation by using panel Granger causality test. Panel granger causality test shows that inflation can be used in order to predict growth for all countries in the sample, while the opposite it is only true for Congo, Dep. Rep and Zimbabwe.

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