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As an answer to this question, it was stated that

Economists believe that higher growth rates tend to also mean higher inflation rates.

As a non macro-economist, I am wondering if this is true? Is there any clear evidence on this relationship?

Higher growth may lead to higher demand and inflation but I guess this happens only if supply does not adjust and prices are not sticky.

The reverse causality running from inflation to economic growth does not seem to have much empirical support due to identification issues.


Moreover, this paper shows that inflation in industrialized countries is largely a global phenomenon. The results provide a good starting point for exploring the hypothesis that inflation should, to some extent, be modeled as a global rather than a local phenomenon. I would interpret these results as going against a connection between (local) economic growth and inflation.

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  • $\begingroup$ This may be an inverse of the Fed argument that inflation symbolizes growth. $\endgroup$ – Daniel Nov 6 '18 at 0:01

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