Theoretical and Applied Economics
No. 2 / 2026 (647), Summer
What is the nature of the relationship between inflation and economic growth? Empirical evidence for the 13 least developed African countries
University of Sfax, Tunisia
Zouheir ABIDA
University of Sfax, Tunisia
Abstract. This study examines the relationship between inflation and economic growth in 13 least developed African countries from 1981 to 2019. Using Two-Step Least Squares (2SLS) and the Generalized Method of Moments (GMM), it identifies a nonlinear relationship between inflation and growth. The findings reveal an inflation threshold of 21.52%: below this level, inflation promotes economic growth, while above it, inflation negatively affects growth. Thus, high inflation hampers economic performance. The results also show that growth in these countries is mainly driven by gross fixed capital formation, population growth, and trade openness. In contrast, public spending and institutional development have a significant negative impact on economic growth. These findings highlight the importance for policymakers to consider the inflation threshold when designing monetary policies to ensure sustainable growth and effective inflation control.
Keywords: inflation, economic growth, dynamic panel threshold, GMM, 2SLS.
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