Date of Submission


Date of Award


Institute Name (Publisher)

Indian Statistical Institute

Document Type

Doctoral Thesis

Degree Name

Doctor of Philosophy

Subject Name

Quantitative Economics


Economic Research Unit (ERU-Kolkata)


Sarkar, Nityananda (ERU-Kolkata; ISI)

Abstract (Summary of the Work)

One of the long-standing and most investigated issues in macroeconomics is the nature of the relationship between inflation and output growth. Given this relationship as a central point of intense interest, one strand of studies has focused on the levels of the two series, while, more recently, an overgrowing body of research has highlighted the importance of the effects which are due to both the levels and the uncertainties associated with these two variables. These studies raise a number of interesting issues regarding the relationship between inflation and output growth. First, is there any direct effect of inflation on output growth, and vice versa? Second, is there any relationship between inflation and nominal (inflation) uncertainty, and if so, is it unidirectional or bi-directional? Third, does inflation uncertainty inhibit output growth? Fourth, can a more stable and less uncertain, i.e., less volatile output growth lead to more output growth? Fifth, is the reduction in output growth related to the reduction in real (output growth) uncertainty? Last, is there any trade-off between the uncertainties of inflation and output growth? Over the last three decades, an extensive body of theoretical and empirical literature has examined the above issues in great details. Consequently, many theories have been proposed to understand the above linkages, and at the same time, a large number of empirical works have been carried out to verify these theories. This thesis is primarily concerned with studying empirically the relationship involving these four variables, viz., inflation, output growth, inflation uncertainty and output growth uncertainty, and consequently the different links involving them so as to be able to provide further answers to some of the issues mentioned above. The format of the first chapter of this thesis is as follows. The next two sections give a brief overview of the important literature on these topics. While Section 1.2 presents a brief review of the major theoretical works involving inflation, inflation uncertainty, output growth and output growth uncertainty, Section 1.3 summarizes the findings of the important empirical studies. The motivation behind this thesis is stated in the next section. This chapter ends with a chapter-wise description of the thesis in Section 1.5.This section presents a brief review of the important theoretical works done on the relationships involving inflation, output growth, uncertainty in inflation and uncertainty in output growth. Economic theory provides mixed evidence regarding the impact of inflation on output growth. Depending on how money is introduced in the model, the effect could be either positive, negative or zero. Introducing money in the underlying utility function, Sidrauski (1967) constructed a model of the super-neutrality of inflation . Tobin (1965) argued that when money is regarded as a substitute for capital, a higher monetary growth increases capital accumulation, causing inflation to have a positive effect on output growth. Stockman (1981), on the other hand, stated that when money is required for purchasing capital goods, higher inflation decreases steadystate real balances and capital stock, and hence a reverse Tobin effect occurs.


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Creative Commons Attribution 4.0 International License
This work is licensed under a Creative Commons Attribution 4.0 International License.


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