Lena Malesevic Teaching assistant at the Faculty of Economics Split, Croatia PhD student at Staffordshire University, UK Investigating non-linearities.

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Presentation transcript:

Lena Malesevic Teaching assistant at the Faculty of Economics Split, Croatia PhD student at Staffordshire University, UK Investigating non-linearities in the inflation-growth trade-off in transition countries Dubrovnik,

Theory Akerlof et al. (2000) Palley (2003) Impact on growth Empirical work Khan and Senhadji (2000) - the threshold is estimated to be at 1-3 percent for industrial countries and 7-11 percent for developing countries.

The model(s) Our sample consists of 8 transition countries (Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania, Slovakia and Slovenia) and 13 years ( ), i.e. 104 observations per each variable. (1) (2) (3) (4)

Dependent variable: GDP per capita growth Static panel (1) Static panel (2) Dynamic panel (1) Dynamic panel (2) GDP growth (lag 1) GDP growth (lag 2) *-0.281* GDP growth (lag 3) * GDP gap (USA) * Investment/GDP 0.358*0.299*0.317*0.373* Govt. expenditure/GDP * Population growth **-0.812*-1.225*-1.819* Life expectancy *-1.997* * Secondary school enrolment (Exports + imports)/GDP **0.029*** Transition index *3.703** War dummy Inflation * * Ln (inflation) * * Squared inflation 5.31e *, ** and *** denote 1, 5 and 10 percent level of significance, respectively. Robust standard errors were used and year dummies included.

D18.176*D62.369**D D D * D26.114*D73.047*D D D * D36.464*D82.612*D D D * D44.396*D91.858D D D ** D53.336*D D D **D ** D12.647D60.675D **D D D21.542*D71.058**D **D D D32.137**D81.478*D **D D D41.669D91.473*D D D D50.323D **D D D The coefficient (  2 ) on the dummy variable, without year dummies, dynamic panel The coefficient (  2 ) on the dummy variable, without year dummies, static panel (3) *, ** and *** denote 1, 5 and 10 percent level of significance, respectively. Robust standard errors were used and year dummies included.

** R2R2 ** R2R2 ** R2R2 ** R2R R 2 for different values of threshold inflation (  *), without year dummies, static panel (4)

** chi2 ** ** ** Wald (chi2) for different values of threshold inflation (  *), without year dummies, dynamic panel

Conclusion Static vs. dynamic model; Non-linearities; Placement of the kink?