Journal of World Economic Research

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Impact of Inflation on Economic Growth in Sri Lanka

Received: 25 April 2016    Accepted: 04 May 2016    Published: 04 June 2016
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Abstract

It is broadly assumed that modest and stable inflation rate stimulates economic growth of a country. Modest inflation encourages savers, enhances investment and therefore speed ups economic growth of the country. The aim of this study is to examine the impact of inflation on economic growth in Sri Lanka for the period of 1988 – 2015 using the framework of Johansen cointegration test and Error Correction model. The results show that there is a long run negative and significant relationship between economic growth and inflation in Sri Lanka. These results support with the model of utility functions in consumption and real money balances, as exposed by Fischer (1979); De Gregorio (19930; Bruno & Easterly (1998) and disagree with the findings of Sidrauski’s (1967) super neutrality of money in the long run. The results are more likely to support the utility functions in real money balances and consumption.

DOI 10.11648/j.jwer.20160501.11
Published in Journal of World Economic Research (Volume 5, Issue 1, February 2016)
Page(s) 1-7
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This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Inflation, Economic Growth, Cointegration, Error Correction Model, Sri Lanka

References
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Author Information
  • Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya, Kelaniya, Sri Lanka

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    M. W. Madurapperuma. (2016). Impact of Inflation on Economic Growth in Sri Lanka. Journal of World Economic Research, 5(1), 1-7. https://doi.org/10.11648/j.jwer.20160501.11

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    M. W. Madurapperuma. Impact of Inflation on Economic Growth in Sri Lanka. J. World Econ. Res. 2016, 5(1), 1-7. doi: 10.11648/j.jwer.20160501.11

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    AMA Style

    M. W. Madurapperuma. Impact of Inflation on Economic Growth in Sri Lanka. J World Econ Res. 2016;5(1):1-7. doi: 10.11648/j.jwer.20160501.11

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  • @article{10.11648/j.jwer.20160501.11,
      author = {M. W. Madurapperuma},
      title = {Impact of Inflation on Economic Growth in Sri Lanka},
      journal = {Journal of World Economic Research},
      volume = {5},
      number = {1},
      pages = {1-7},
      doi = {10.11648/j.jwer.20160501.11},
      url = {https://doi.org/10.11648/j.jwer.20160501.11},
      eprint = {https://download.sciencepg.com/pdf/10.11648.j.jwer.20160501.11},
      abstract = {It is broadly assumed that modest and stable inflation rate stimulates economic growth of a country. Modest inflation encourages savers, enhances investment and therefore speed ups economic growth of the country. The aim of this study is to examine the impact of inflation on economic growth in Sri Lanka for the period of 1988 – 2015 using the framework of Johansen cointegration test and Error Correction model. The results show that there is a long run negative and significant relationship between economic growth and inflation in Sri Lanka. These results support with the model of utility functions in consumption and real money balances, as exposed by Fischer (1979); De Gregorio (19930; Bruno & Easterly (1998) and disagree with the findings of Sidrauski’s (1967) super neutrality of money in the long run. The results are more likely to support the utility functions in real money balances and consumption.},
     year = {2016}
    }
    

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    AB  - It is broadly assumed that modest and stable inflation rate stimulates economic growth of a country. Modest inflation encourages savers, enhances investment and therefore speed ups economic growth of the country. The aim of this study is to examine the impact of inflation on economic growth in Sri Lanka for the period of 1988 – 2015 using the framework of Johansen cointegration test and Error Correction model. The results show that there is a long run negative and significant relationship between economic growth and inflation in Sri Lanka. These results support with the model of utility functions in consumption and real money balances, as exposed by Fischer (1979); De Gregorio (19930; Bruno & Easterly (1998) and disagree with the findings of Sidrauski’s (1967) super neutrality of money in the long run. The results are more likely to support the utility functions in real money balances and consumption.
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    IS  - 1
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