Startseite Inflation-Growth Nexus in Botswana: Can Lower Inflation Really Spur Growth in the Country?
Artikel
Lizenziert
Nicht lizenziert Erfordert eine Authentifizierung

Inflation-Growth Nexus in Botswana: Can Lower Inflation Really Spur Growth in the Country?

  • Gosego Mothuti und Andrew Phiri EMAIL logo
Veröffentlicht/Copyright: 31. August 2018
Veröffentlichen auch Sie bei De Gruyter Brill

Abstract

Does inflation affect economic growth in Botswana over the short-run and long-run? In applying bounds procedure for modelling ARDL cointegation effects applied to empirical data collected between 1975 and 2016 we find that this hypothesis does not hold true for Botswana as inflation is found to be insignificantly related with economic growth over both the short and long-run. Our growth equation estimates point to exports (positive), government size (negative) and an Pula/Dollar exchange rate (negative) as being significantly correlated with steady-state GDP growth. Further empirical exercises show that an appreciated Pula/dollar exchange rate increases inflation whilst bearing no effect on economic growth. Conversely, a depreciated Pula/Dollar exchange simultaneously decreases inflation and economic growth for the Botswana economy. Policymakers should be this aware that attainment of lower inflation rates which occurs through a depreciated Pula/Dollar currency will only retard economic growth.

References

Acemoglu, D., S. Johnson, and J. Robinson (2001), “An African Success Story: Botswana”, MIT Department of Economics Working Papers No. 0137, July.10.2139/ssrn.290791Suche in Google Scholar

Adusei, M. 2012. “The Inflation-Growth Nexus: Estimating the Threshold Effect for South Africa.” Journal of Money, Investment and Banking 26. 87–93.Suche in Google Scholar

Atta, J., K. Jefferis, and P. Siwana-Ndai (1999), “Exchange Rate Policy and Price Determination in Botswana”, AERC Research Paper 93, March.Suche in Google Scholar

Barro, R. 1991. “Economic Growth in a Cross Section of Countries.” Quarterly Journal of Economics 106 (425): 407–43.10.2307/2937943Suche in Google Scholar

Barro, R. (1995), “Inflation and Growth”, NBER Working Paper No. 5326, October.10.4324/9780429270949-35Suche in Google Scholar

Barro, R., and X. Sala-i-Martin. 1995. Economic Growth. New York: McGRaw-Hill.10.3386/w5326Suche in Google Scholar

Bruno, M. and W. Easterly. 1998. “Inflation Crisis and Long-Run Growth.” Journal of Monetary Economics 41 (1): 3–26.10.1016/S0304-3932(97)00063-9Suche in Google Scholar

Cooley, T., and G. Hansen. 1989. “The Inflation Tax in a Real Business Cycle Model.” American Economics Review 79 (4): 733–48.10.4324/9780203070710.ch11Suche in Google Scholar

De Long, J. B. and L. H. Summers. 1991. “Equipment Investment and Economic Growth.” The Quarterly Journal of Economics 106 (2): 445–502.10.2307/2937944Suche in Google Scholar

Dukker, D., P. Gomis-Porqueras, and P. Hernandez-Verme (2005), “Threshold Effects in the Relationship between Inflation and Growth: A New Panel-Data Approach”, MPRA Working Paper No. 38225, February.Suche in Google Scholar

Ee, C. 2016. “Export-Led Growth Hypothesis: Empirical Evidence from Selected Sub-Saharan African Countries.” Procedia Economics and Finance 35. 232–40.10.1016/S2212-5671(16)00029-0Suche in Google Scholar

Eggoh, J., and M. Kahn. 2014. “On the Nonlinear Relationship between Inflation and Growth.” Research in Economics 68 (2): 133–43.10.1016/j.rie.2014.01.001Suche in Google Scholar

Fischer, S. 1993. “The Role of Macroeconomic Factors of Growth.” Journal of Monetary Economics 32 (3): 485–512.10.1016/0304-3932(93)90027-DSuche in Google Scholar

Ghosh, A. and S. Phillips. 1998. “Warning: Inflation May Be Harmful to Your Growth.” IMF Staff Papers 45 (4): 672–710.10.2307/3867589Suche in Google Scholar

Greenwood, J., and G. Huffman. 1987. “A Dynamic Equilibrium Model of Inflation and Unemployment.” Journal of Monetary Economics 19 (2): 203–28.10.1016/0304-3932(87)90047-XSuche in Google Scholar

Guesh, J. 1997. “Government Size and Economic Growth in Developing Countries: A Political-Economy Framework.” Journal of Macroeconomics 19 (1): 175–92.10.1016/S0164-0704(97)00010-4Suche in Google Scholar

Gyimah-Brempong, K., O. Paddison, and W. Mitiku. 2006. “Higher Education and Economic Growth in Africa.” The Journal of Development Studies 42 (3): 509–29.10.1080/00220380600576490Suche in Google Scholar

Harvey, R. 2015. “From Diamonds to Coal? Critical Reflections on Botswana’s Economic Future.” The Extractive Industries and Society 2 (4): 827–39.10.1016/j.exis.2015.06.009Suche in Google Scholar

Hineline, D. 2007. “Examining the Robustness of the Inflation and Growth Relationship.” Southern Economic Journal 73 (4): 1020–37.10.1002/j.2325-8012.2007.tb00816.xSuche in Google Scholar

Ibarra, R., and D. Trupkin. 2016. “Re-Examining the Relationship between Inflation and Growth: Do Institutions Matter in Developing Countries.” Economic Modelling 52 (B): 332–51.10.1016/j.econmod.2015.09.011Suche in Google Scholar

Iyke, B., and N. Odhimabo. 2017. “Inflationary Thresholds, Financial Development and Economic Growth: New Evidence from Two West African Countries.” Global Economy Journal 17 (2): 1–11.Suche in Google Scholar

Kahn, M., and A. Senhadji. 2001. “Threshold Effects in the Relationship between Inflation and Growth.” IMF Staff Papers 48 (1): 1–21.10.2139/ssrn.879840Suche in Google Scholar

Kremer, S., A. Bick, and D. Nautz. 2009. “Inflation and Growth: New Evidence from a Dynamic Panel Threshold Analysis.” Empirical Economics 44 (2): 861–78.10.1007/s00181-012-0553-9Suche in Google Scholar

Leshoro, T. (2012), “Estimating the Inflation Threshold for South Africa”, ERSA Working Papers No. 285, May.10.1080/10800379.2012.12097238Suche in Google Scholar

Levine, R., and D. Renelt. 1992. “A Sensitivity Analysis of Cross-Country Regressions”.” American Economic Review 82 (4): 942–63.Suche in Google Scholar

Mavikela, N., S. Mhaka, and A. Phiri (2017), “The Inflation-Growth Relationship in SSA Inflation-Targeting Countries”, MPRA Paper No. 82141, October.10.2478/subboec-2019-0011Suche in Google Scholar

Mkhatshwa, Z., A. Tijani, and M. Masuku. 2015. “Analysis of the Relationship between Inflation, Economic Growth and Agricultural Growth in Swaziland from 1980–2013.” Journal of Economics and Sustainable Development 6 (18): 189–204.Suche in Google Scholar

Mogotsi, I. 2002. “Botswana’s Diamonds Boom: Was There a Dutch Disease?” South African Journal of Economics 70 (1): 128–56.10.1111/j.1813-6982.2002.tb00041.xSuche in Google Scholar

Mubarik, Y. 2005. “Inflation and Growth: An Estimate of the Threshold Level of Inflation in Pakistan.” SBP Research Bulletin 1–2: 35–44.Suche in Google Scholar

Munir, Q., and K. Mansur. 2009. “Non-Linearity between Inflation Rate and GDP Growth in Malaysia.” Economics Bulletin 29 (3): 1555–69.Suche in Google Scholar

Munyeka. 2014. “The Relationship between Economic Growth and Inflation in the South African Economy.” Mediterranean Journal of Social Sciences 5 (15): 119–29.10.5901/mjss.2014.v5n15p119Suche in Google Scholar

Ndoricimpa, A. 2017. “Threshold Effects of Inflation on Economic Growth” Is Africa Different?” International Economic Journal 31 (4): 599–620.10.1080/10168737.2017.1380679Suche in Google Scholar

Pesaran, H., Y. Shin, and R. Smith (2001), “Bounds testing approaches to the analysis of level relationships.” Journal of Applied Econometrics 16 (3): 289–326.10.1002/jae.616Suche in Google Scholar

Pegg, S. 2010. “Is There a Dutch Disease in Botswana?” Resource Policy 35 (1): 14–19.10.1016/j.resourpol.2009.07.003Suche in Google Scholar

Phetwe, M., and L. Molefe. 2016. “Inflation and Economic Growth: Estimation of a Threshold Level of Inflation in Botswana.” Bank of Botswana Research Bulletin 29 (1): 12–23.Suche in Google Scholar

Phiri, A. 2010. “At Level Is Inflation Least Detrimental Towards Finance-Growth Activity in South Africa?” Journal of Sustainable Development in Africa 12 (6): 354–64.Suche in Google Scholar

Phiri, A. 2017. “Changes in Inflation Persistence Prior and Subsequent to the Subprime Crisis: What are the Implications for South Africa?” Journal of Reviews on Global Economics 6. 198–207.10.6000/1929-7092.2017.06.18Suche in Google Scholar

Phiri, A. 2018. “Nonlinear Impact of Inflation on Economic Growth in South Africa.” International Journal of Sustainable Economy 10 (1): 1–17.10.1504/IJSE.2018.088624Suche in Google Scholar

Sala-i-Martin, X. 1997. “I Just Ran Four Million Regressions.” American Economic Review 87 (2): 178–83.10.3386/w6252Suche in Google Scholar

Sarel, M. 1996. “Nonlinear Effects of Inflation on Economic Growth.” IMF Staff Papers 43 (1): 199–215.10.2307/3867357Suche in Google Scholar

Seleteng, M., M. Bittencourt, and R. Van Eyden. 2013. “Non-Linearities in the Inflation-Growth Nexus in the SADC Region: A Penal Smooth Transition Regression Approach.” Economic Modelling 30 (C): 149–56.10.1016/j.econmod.2012.09.028Suche in Google Scholar

Shin, Y., B. Yu, and M. Greenwood-Nimmo. 2014. “Modelling Asymmetric Cointegration and Dynamic Multipliers in a Nonlinear ARDL Framework.” In Festsschrift in Honor of Peter Schmidt: Econometric Methods and Applications, edited by R. Sickels and W. Horace, 281–314. Springer.10.1007/978-1-4899-8008-3_9Suche in Google Scholar

Sidrauski, M. 1967. “Rational Choice and Patterns of Economic Growth in a Monetary Economy.” American Economic Review 57 (2): 534–44.Suche in Google Scholar

Solow, R. 1965. “A Contribution to the Theory of Economic Growth.” Quarterly Journal of Economics 70 (1): 65–94.10.2307/1884513Suche in Google Scholar

Stockman, M. 1981. “Anticipated Inflation and Capital Stock in a Cash-In-Advance Economy.” Journal of Monetary Economics 8 (3): 387–93.10.1016/0304-3932(81)90018-0Suche in Google Scholar

Taye, H. (2011), “Botswana’s Debt Sustainability: Tracking the Path”, BIDPA Working Paper No. 28, March.Suche in Google Scholar

Tobin, J. 1965. “Money and Economic Growth.” Econometrica 33 (4): 671–84.10.2307/1910352Suche in Google Scholar

Tung, L., and P. Thanh. 2015. “Threshold in the Relationship between Inflation and Economic Growth: Empirical Evidence in Vietnam.” Asian Social Sciences 11 (10): 105–12.10.5539/ass.v11n10p105Suche in Google Scholar

Uneze, E. 2013. “The Relation between Capital Formation and Economic Growth: Evidence from sub-Saharan African Countries.” Journal of Economic Policy Reform 16 (3): 272–86.10.1080/17487870.2013.799916Suche in Google Scholar

Vaona, A. 2012. “Inflation and Growth in the Long Run: A New Keynesian Theory and Further Semiparametric Evidence.” Macroeconomics Dynamics 16 (1): 94–132.10.1017/S1365100510000453Suche in Google Scholar

Vinayagathasan, T. 2013. “Inflation and Economic Growth: A Dynamic Panel Threshold Analysis for Asian Economies.” Journal of Asian Economies 26. 31–41.10.1016/j.asieco.2013.04.001Suche in Google Scholar

Published Online: 2018-08-31

© 2018 Walter de Gruyter GmbH, Berlin/Boston

Heruntergeladen am 28.9.2025 von https://www.degruyterbrill.com/document/doi/10.1515/gej-2018-0045/html
Button zum nach oben scrollen