Does High Inflation Affect Growth in the Long and Short Run?

Journal of Applied Economics, Vol. 4, No. 1, pp. 89-105, May 2001

Posted: 28 Jun 2004

See all articles by Joao Ricardo Faria

Joao Ricardo Faria

Florida Atlantic University; Florida Atlantic University

Francisco Carneiro

The World Bank

Abstract

This paper investigates the relationship between inflation and output in the context of an economy facing persistent high inflation. By analyzing the case of Brazil, we find that inflation does not impact real output in the long run, but that in the short run there exists a negative effect from inflation on output. These results support Sidrauski's (1967) superneutrality of money in the long run, but cast doubt on the short run implications of the model for separable utility functions in consumption and real money balances, as exposed by Fischer (1979). The results are more likely to support a class of utility functions in which real money balances and consumption are perfect complements.

Keywords: Inflation, growth, output

JEL Classification: O42, E31

Suggested Citation

Faria, Joao Ricardo and Faria, Joao Ricardo and Carneiro, Francisco Galrao, Does High Inflation Affect Growth in the Long and Short Run?. Journal of Applied Economics, Vol. 4, No. 1, pp. 89-105, May 2001, Available at SSRN: https://ssrn.com/abstract=558745

Joao Ricardo Faria (Contact Author)

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://https://sites.google.com/site/jockafaria/home

Florida Atlantic University ( email )

Boca Raton, FL 33431
United States

Francisco Galrao Carneiro

The World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

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