Inflation and Economic Growth in Togo from 1966 to 2011.pdf

1、This paper empirically estimates the model of inflation-growth nexus by using yearly data of CPI, real GDP, total population, money supply (M2), domestic investment and export from 1966 to 2011 in response to the role pl

2、ayed by inflation in economic growth of Togo before and after the CFA devaluation, below or above the 3％ annual optimal rate fixed by WAEMU.Based on Khan and Senhadji (2001) popular methodology and VAR techniques along w

3、ith the accumulated response functions, the empirical evidence indicate absence of long-run equilibrium among the series but presence of a linear relationship among them where inflation affects positively, strongly and s

4、ignificantly economic growth and not the other way around.The findings suggest also the absence of a nonlinear relationship between inflation and growth, meaning there's not a threshold level of inflation in Togo.This im

5、plies below or above the community annual optimal rate of 3％, inflation still affects growth positively and significantly.Moreover, this positive association between inflation and growth didn't change even after the stro

6、ng hit took by inflation due to the CFA devaluation in 1994.Also in Togo, inflation is not a monetary phenomenon but instead an aggregate demand phenomenon.Further the generated impulse response functions confirm inflati

7、on to be a critical factor to sustain the economy.In regard of our findings, the current 3％ annual inflation targeting policy did favorite growth for the last 20 years but it would be more advantageous especially in Togo

8、 if it becomes relaxed by shifting the limit from 3％ to the 7％ or 11％ threshold level as estimated by Khan and Senhadji (2000) for developing countries.We therefore recommend WAEMU to consider on gradual basis, adopting