Muhammad ayyoub imran sharif chaudhry fatima farooq

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Muhammad Ayyoub, Imran Sharif Chaudhry, Fatima Farooq 53 that there exists a temporal negative relationship between these two variables beyond 40 percent threshold level. They conclude that there is no permanent damage to economic growth due to discrete high inflation crisis. Sarel (1996) explores the possibility of non-linear effects of inflation on economic growth and finds a significant structural break which occurs at annual average 8 percent inflation rate, in the function that relates economic growth to inflation. His results show that below that structural break, inflation has slightly positive effect on growth but after 8 percent inflation rate, it has powerful negative effect on growth. These results have been found by using OLS technique after constructing a joint panel database by collecting annual information of 87 countries for the period 1970-1990. Using the annual time series data for the period 1971-1995, Khan and Qasim (1996) estimate the key determinants of inflation in Pakistan. They disaggregate inflation into food and non-food inflation and suggest a strong role of money supply in accelerating inflation in Pakistan. Other factors causing inflation, investigated by the researchers, are currency devaluation, value addition in agriculture sector, support price of wheat, import prices and price of electricity. Short-run consequences of rapid dis inflation are addressed by Ghosh and Phillips (1998), and find that starting from lower inflation rates; a rapid disinflation is associated with fall in GDP growth. They employ a large panel data set, covering IMF member countries for the period 1960–96. They find two important nonlinearities in the inflation- growth relationship. At very low inflation rates (around 2–3 percent a year, or lower), inflation and growth are positively correlated. Otherwise, inflation and growth are negatively correlated, but the relationship is convex, so that the decline in growth associated with an increase from 10 percent to 20 percent inflation is much larger than that associated with moving from 40 percent to 50 percent inflation. Nell (2000) examines the issue whether inflation is always harmful to growth or not? Considering the South African Economy’s data for the period 1960-1999 and dividing it into four episodes, using Vector Auto Regressive (VAR) technique, his empirical results suggest that inflation within the single-digit zone may beneficial to growth, while inflation in the double digit zone appears to impose costs in terms of slower growth. Faria and Carneiro (2001) investigate the relationship between inflation and output for the economy of Brazil where permanent inflationary shock has been observed for the last many years. They use a bivariate vector auto-regression composed of output growth and the change in inflation in order to test the hypothesis that inflation has long run impact on output. They also use the data for the same period 1980-95 to estimate the short run relationship between inflation and real output. Their findings verify Sidrauski’s superneutrality of money which can be defined as inflation has no real effect on output and productivity in the long-run. Their results suggest that inflation has real effects on
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