Summary of the literature: empirical aspects

As a result of the renewed interest in growth theory in the 1980’s due to the work by Romer (1986) and Lucas (1988), a vast amount of empirical literature has emerged which seeks to account for the remarkable variability of growth rates across countries. In this literature, numerous specifications of cross-country growth regressions have been tested to establish significant linkages between long run average growth rates and various indicators of economic policy. Together with other indicators of macroeconomic policy, the rate of inflation is widely used in these regressions as an explanatory variable, and there is a broad consensus that inflation is an important determinant of the rate of per capita growth. Drawing on this literature, we establish in this chapter a set of ‘stylized facts’, with the aim to summarize the available evidence with respect to the long run interaction between inflation and per capita growth.