INFLATION AND ECONOMIC GROWTH IN LATIN AMERICA, A NON-LINEAR RELATIONSHIP
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Abstract
The article reviews and reformulates theoretically and empirically the non-linear relationship between inflation and economic growth proposed by Thirlwall (1974) for the set of Latin American economies that strictly use the inflation targeting regime during the period 2003-2020. The hypothesis of this research resides in the existence of an optimal inflation level for which the economic growth rate reaches a maximum level, an inflation rate which differs from the current monetary policy target. Consequently, the argument developed in this article deals with the existence of a positive relationship between growth and inflation at low levels, while the degree of preference of central banks has been such that they have given up growth and employment opportunities to price stability.
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