An empirical analysis of the effect of growth on inflation, Australia, Canada and the United States
Economists often comment that inflation will tend to increase (or decrease) if growth is higher or lower than the ‘potential’ growth rate of the economy. After setting out a theoretical justification for such a relationship we estimate equations relating the change in inflation to growth rates for the US, Canada and Australia. Our system also allows for the possibility that traded goods price inflation will influence the inflation rate of consumer prices. The estimates yield ‘steady...[Show more]
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