An Econometric Assessment of the Impact of Inflation on Economic Growth: A Case Study of Zimbabwe Economy
Volume 7, Issue 1, March 2018, Pages: 17-22
Received: Apr. 6, 2018;
Accepted: Apr. 20, 2018;
Published: May 16, 2018
Views 93 Downloads 8
Shame Mukoka, Faculty of Commerce, Zimbabwe Open University, Harare, Zimbabwe
This study sought to determine the impact of inflation on Economic growth in Zimbabwe. The time series yearly data for Inflation and Economic Growth (GDP) from 1990 to 2017 were used for the study. Ordinary Least Squares (OLS) was used to determine the impact of inflation on Economic growth. Some Stationarity and Cointegration tests were carried out. Data became stationarity after first and second differencing using Augmented Dickey Fuller Test. There was also evidence of cointegration between the two variables using the Johansen Cointegration Test. The results of the study established no relationship between Inflation and Gross Domestic Product in Zimbabwe. These results have important policy implications, implying that controlling inflation is a necessary but not a pre-condition for promoting economic growth in Zimbabwe. Thus, the Zimbabwean government should focus on maintaining inflation at a low rate (single digit). In this regard the study concluded that all factors which cause an increase in the general price levels such as energy (petrol, diesel, gasoline, paraffin), exchange rates volatility, increase in money supply, poor agricultural production and so forth, should be kept on check, with the appropriate policies so as to foster economic growth.
An Econometric Assessment of the Impact of Inflation on Economic Growth: A Case Study of Zimbabwe Economy, Economics.
Vol. 7, No. 1,
2018, pp. 17-22.
Ahmed, S. (2010). ‘An Empirical Study on Inflation and Economic Growth in Bangladesh’. OIDA International Journal of Sustainable Development. Vol. 2, No. 3, pp. 41-48.
Chimobi, O. (2010). Inflation and Economic Growth in Nigeria. Journal of Sustainable Development, Vol. 3, No. 2, pp. 44-51.
IMF. (2009). Statement at the Conclusion of an IMF Staff Mission to Zimbabwe. Press Release 09/249, http://www.imf.org/external/np/sec/pr/2009/pr09249.
Makuyana G, Munongo S, and Zivanomoyo, J (2011).Does the Zimbabwean exchange rate follow a random walk: January 2000 - December 2008?Journal of Economics and International Finance Vol. 3(2), pp.121-124, February 2011.
Economic Outlook (2018): Zimbabwe Economy Unemployment and Inflation Statistics.
Fischer, S. (1993). The Role of Macroeconomic Factors in Growth. Journal of Monetary Economics, Vol. 47, No. 5, pp. 485-512.
Barro, R. (1995). ‘Inflation and economic growth’: NBER Working Paper 53(26) 166-176.
Bruno, M and Easterly, W (1996). Inflation and Growth, in search of a stable relationship: A Review Paper. Federal Reserve Bank.
Ghosh, A. and Phillips, S. (1998). Warning: Inflation May Be Harmful to Your Growth, IMF Staff Papers, Vol. 45, No. 4, pp. 672-710.
Quartey, P. (2010). Price Stability and the Growth Maximizing rate of inflation for Ghana, Business and Economic Journal, Vol. 1, No. 1, pp. 180-194.
Hasanov, F. (2010). Relationship between Inflation and Economic Growth in Azerbaijani Economy’: Is there any Threshold Effect? Asian Journal of Business and Management Sciences, Vol. 1, No. 1, pp. 6-7.
Umaru, A. and Zubairu, J. (2012). The Effect of Inflation on the Growth and Development of the Nigerian Economy: An Empirical Analysis, International Journal of Business and Social Science, Vol. 3, No. 10, pp. 187-188.
Frimpong, M. and Oteng-Abayie, F. (2010). When is Inflation harmful? Estimating the Threshold Effect for Ghana, American Journal of Economics and Business Administration, Vol. 2, No. 3, pp. 232-239.
Bick, A. Kremer, S. and Nautz, D. (2009). ‘Inflation and Growth: New Evidence from a Dynamic Panel Threshold Analysis’. SFB 649 Discussion Paper 036. pp. 33-47.
Khan, M. and Senhadji, S. (2001). Threshold Effects in the Relationship between Inflation and Growth, IMF Staff Papers, Vol. 48, No. 1, pp. 1-21.
Nell, K. (2000). Is Low Inflation a Precondition for Faster Growth, The Case of South Africa, Department of Economics, University of Kent, United Kingdom.
Sergii, P. (2009). Inflation and Economic Growth: The Non-Linear relationship. Evidence from CIS Countries, Kyiv School of Economics, Ukraine.
Espinoza, R., Leon, H. and Prasad, A. (2010). Estimating the Inflation-Growth Nexus-A Smooth Transition Model, IMF Working Paper. Vol. 10, No. 76, pp. 2-9.
Mehari, M. and Wondafrash, A. (2008). The Impact of Money Supply on Inflation in Ethiopia.
Mwase, N. (2006). An Empirical Investigation of the Exchange Rate Pass-Through to Inflation in Tanzania, IMF Working Paper /06/150, 4-7.