Their results suggest that inflation has real effects

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and productivity in the long-run. Their results suggest that inflation has real effects on output in the short run. Using co-integration and error correction models, Malik and Chowdhury (2001) finds a long-run positive relationship between GDP growth rate and inflation for four South Asian countries. Supporting the Structuralists’ view, their results also suggest that
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54 Pakistan Journal of Social Sciences Vol. 31, No. 1 moderate inflation is helpful to growth and faster economic growth feeds back into inflation. Thus the authors recommend moderate inflation for growth of the economies of Bangladesh, India, Pakistan and Sri Lanka. Khan and Senhadji (2001) examine threshold effects of inflation on growth separately for industrial and developing countries. The data set covers 140 countries from both groups and non-linear least squares (NLLS) and conditional least squares methods are used. The empirical results verify the existence of a threshold beyond which inflation exerts a negative effect on growth. Significant thresholds at 1-3 percent and 11-12 percent inflation levels for industrialized and developing countries have been found. The view of low inflation for sustainable growth is strongly supported by this study. Gillman, Harris and Matyas (2002) present an econometric model with the feature of the inflation rate reducing the return to capital, by taking two samples of OECD and APEC member countries over the years 1961-1997. Inflation rate is included as central variable and the theory is related with the concept of equilibrium along the balanced growth path that is implicitly includes transitional approaches to the balanced growth rate. The results, consistent with Khan and Senhadji (2000), show that the effective is negative and significant at low inflation rates for the OECD .When inflation rate going from 0-10 percent range to a 0-5 percent range, the negative co-efficient nearly doubles in magnitude and remains highly significant. Gokal and Hanif (2004) review several different economic theories to develop consensus on the inflation and growth relationship for the economy of Fiji. Their results show that a weak negative correlation exists between inflation and growth, while the change in output gap bears significant bearing. The causality between the two variables ran one-way from GDP growth to inflation. Sweidan (2004) examines the relationship between inflation and economic growth for economy of Jordan and finds a structural break point at 2 percent level of inflation. Another issue which is covered by the study is to check the effect of inflation uncertainty on the growth and developments in the economy. The result implies that the effects of inflation on growth are stronger as compared to the effects of inflation uncertainty and variability. Ahmed and Mortaza (2005) explore the relationship between real GDP and CPI and find threshold at 6 percent level of inflation for the economy of Bangladesh. The empirical evidence demonstrates that their exists a statistically significant long-run negative relationship between these two variables.
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