Threshold Effects in the Relationship Between Inflation and Growth

The essay explores the evolving relationship between inflation and economic growth, particularly post-1970s, when high inflation began to negatively impact growth. It discusses various studies that identified different threshold levels of inflation, ranging from 2.5% to 40%, where growth effects shift from neutral to detrimental. Notably, Khan and Senhadji's 2001 analysis refines previous research by differentiating between developing and industrialized nations and employing advanced econometric methods to identify and test for significant threshold effects in the inflation-growth nexus.