The Effects of Inflation on Sustainable Growth: The Case of OECD Countries

Abstract

The sustainable growth represents the future path and goal of the world. However, the persistence of the inflationist atmosphere in OECD needs the serious examination of the effect of inflation on the sustainability. Knowing the crucial role of sustainable growth path for the economy and the environment, the aim of this work is to examine the determinants of the sustainable growth in OECD countries. The current study aims to extend this line of research by including inflation in the Environmental Kuznets Curve Modified (ECK-modified) for the case of OECD countries. This study represents an extension of our latest work 1. So the object of this study is to treats the effect of inflation on sustainable growth through analyzing the impact of the level of consumption prices on sustainable growth in the 12 OECD countries evaluate this link empirically, we have used a panel data model applied on the (EKC-modified) function for a panel model applying on the modified environmental Kuznets curve (MECK) for the case of 12 OECD countries covering the period (1990-2013). We have found a significant and negative effect of inflation on sustainable growth. However, the effect is low. OECD countries should ensure a modest inflation and enhance the use of technological innovation in renewable energy to maintain a sustainable growth path.