The Fusion of Inflation and Economic Growth: A Time Series Analysis

Abstract

This study addresses the two types of fusion between inflation and economic growth in Uzbekistan. The first is the quantitative relationship between inflation and economic growth, and the second is the marginal relationship between them. The first relationship is based on a simple regression model, while the second analysis is carried out by a threshold regression model. Also, the threshold regression model itself has been analyzed using two methods (TSLS and OLS). The data for the research was covered from 2000 to 2022. Also, the variables used in the analysis were checked for stationarity by the Dickey-Fuller and Phillips-Perron tests. The predictors were included in the study after confirmation of hypothesis tests that were positive. According to the results of the study, the correlation between inflation and economic growth in Uzbekistan is negative. Particularly when inflation is lower than a certain level, economic growth is influenced positively, while it has a negative effect on economic growth when it exceeds a certain level. In general, the study determined the optimal level of inflation for Uzbekistan in terms of its positive impact on economic growth.