Answer to Question #95515 in Macroeconomics for fazli

Question

How the value to K should be calculated in to find threshold level of inflation?

Answer 1

The Threshold Level of Inflation, K

 

 

 

The two main goals of that promote sustainable microeconomic policies are high growth rate of output and low inflation. Empirical studies are necessary to explain the output and levels of inflation in a country such as Econometric Framework. Here we deal with a dynamic panel threshold model. Threshold level of inflation is based on the following equation:

 

 G = β0 + β1(INF t ) + β2*Dt (INF t-k)+ β3 ( POP t) + β4 (INVST t) + U t 

 

Economic growth G and inflation are calculated as: 

 

 G t = 100* DLOG (Y t )

 

 INF = 100 * DLOG (Pt )

 

Where;

 

Y t : real GDP

 

 Pt : consumer price index

 

 G t : growth rate of real GDP 

 

 INF t : inflation

 

 POP t : population growth rate

 

 INVST t : investment growth rate

 

 k : threshold level of inflation

 

 Ut : error term

 

Reference

 

Thanabalasingam Vinayagathasan ; “Inflation and economic growth” January 2013;paper 12-17