International Journal of Social Science & Economic Research
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Title:
ESTIMATING THE THRESHOLD LEVEL OF INFLATION FOR ETHIOPIA

Authors:
Melka G. Balcha, Mulugeta A. Jemberie


Volume - 2 Issue - 7, Pages - 3823-3842

Abstract:
This paper tries to investigate the existence of a threshold level of inflation in Ethiopia using intuitive analysis and an ad hoc threshold regression model. It mainly examines the presence of non-linear relationship between inflation and economic growth for the period 1982/83 through 2010/11. While the literature widely agrees on the of existence non-linear impacts of inflation on economic growth, our paper finds no evidence the existence of non-linear effect of inflation on economic growth in Ethiopia. This means that there is no evidence of the existence of a "threshold" level of inflation during the sample period. Instead, this paper finds the existence of a significant break when the inflation level equals to 10%. Our findings also portray that the negative impact of inflation on economic growth significantly reduces at elevated levels of inflation relative to very low levels.

Cite this Article:

[Balcha, Melka G., and Mulugeta A. Jemberie. "ESTIMATING THE THRESHOLD LEVEL OF INFLATION FOR ETHIOPIA." International Journal of Social Science & Economic Research 2.7 (2017): 3823-842.]

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