The Relation Between Growth and Inflation Rates in Latin America‪.‬

ABSTRACT Inflation has long been a problem for countries in Latin America. While some countries have made progress in addressing the problem, other countries have not been able to achieve sustained economic growth. Keynesian thought posits the notion that inflation and growth can be positively related, while other theories suggest that inflation is detrimental to long-run growth. Various empirical studies yield conflicting results. This study applies two Granger causality tests to seventeen Latin American countries in order to determine possible long-run relations. For most of the countries, no causality is found, while unidirectional causality and bi-directional causality is found in a limited number of countries.