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Investigating Non-Linearities in the Inflation-Growth Trade-off in Transition Countries

This paper investigates the inflation-growth relationship in transition countries via dynamic panel analyses. Following recent theoretical arguments, we assess the existence of non-linearities in this relationship. It has been suggested that the positive effects of low inflation on growth differ between developing and developed countries, i.e. that the optimal inflation rate might be higher for developing countries. Consequently, this paper investigates whether a similar conclusion holds for transition countries. In doing so we raise the question as to whether inflation targets have been too low in these countries.

inflation; growth; non-linearities; transition countries

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