ABSTRACT

The chapter formulates a nesting model for studying the theoretical literature on inflation and endogenous growth. It analyses different classes of endogenous growth models, with different usage of physical and human capital, with different exchange technologies. First, the chapter shows that a broad array of models can all generate significant negative effects of inflation on growth. Second, it shows that these models can be differentiated primarily by the fact whether there is a Tobin-type effect of inflation and also whether the inflation–growth effect becomes weaker as the inflation rate rises, a nonlinearity, or stays essentially constant over the range of inflation rates. The chapter compares these features of the models to empirical evidence as a way to summarize the efficacy of the models.