Economic growth and inflation in central america: 2000–2022, analysis using panel data
DOI:
https://doi.org/10.70335/sapiendus.1.1.11Keywords:
hiper inflacion, , inflacion, crecimiento, datos de panelAbstract
Introduction: Growth is one of the most important public policy objectives for any economy as a determinant for economic development and quality of life. In this sense, understanding its relationship with other macroeconomic phenomenon such as inflation is of great relevance. Objective: To investigate the relationship between economic growth in five Central American countries (Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua) during the period 2000-2022 and the inflation experienced, considering other control variables. Methodology: Annual data on growth rates and percentage relationships for a set of variables were collected, creating a panel database for 23 years. Different econometric models were employed, including Fixed Effects and instrumental variable models. Seemingly Unrelated Regressions (SUR) models were also utilized. Results: Considering the models, the negative economic relationship between inflation and economic growth during the period analyzed is not the norm. However, in the SUR models that account for contemporaneous disturbances in the regressions, statistically significant relationships were found for Costa Rica, Guatemala, and Honduras, with the first two showing negative signs. Conclusions: The empiri-
cal results based on panel data series do not confirm a significant relationship between inflation and economic growth. However, it would be erroneous to conclude that inflation "does not matter" for economic growth. It is simply that during the analyzed period and with the available data, significant relationships could not be found for all the countries studied.
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