Inflation and economic growth : evidence from the Southern African Development Community

Abstract

In this paper we investigate the role of inflation rates in determining economic growth in fifteen sub-Saharan African countries, which are all members of the Southern African Development Community (SADC), between 1980 and 2009. The results, based on panel time-series data and analysis (we use the Fixed Effects and Fixed Effects with Instru- mental Variables estimators to account for heterogeneity and endo- geneity in thin panels), suggest that inflation has had a detrimental effect to growth in the community. We highlight that in ation has offset the Mundell-Tobin effect and consequently reduced the much needed economic activity in the community, and also the importance of an institutional framework conducive to a stable macroeconomic environment as a precondition for development and prosperity in the community