The short and long-run dynamics between inflation and economic growth in BRICS

Abstract

The short-run and long-run dynamics between the inflation and economic growth is one of the prominent debates in the economics literature. This article investigates the short- and long-run relationships between the inflation and economic growth in BRICS (Brazil, Russia, India, China and South Africa) over the last three decades. The Johansen cointegration and the autoregressive distributed lag model (ARDL) bound test were used for the long-run relationship, and a VAR analysis sheds light on the short-run dynamics. The results found a positive long-run relationship between inflation and economic growth for India but no long-run relationship in other four countries. A significant negative short-run relationship is found for Brazil, Russia, China and South Africa while a positive short-run relationship is found for India.

Keywords:

• cointegration
• inflation
• economic growth
• BRICS

JEL Classification:

• E31
• F43
• O40