The inflation–output nexus: Empirical evidence from India, South Africa, and Brazil

In this paper we study the relationship between output and inflation for India, South Africa and Brazil, using the EGARCH model. For India and South Africa, we find evidence of: (1) the Cukierman and Meltzer hypothesis that inflation volatility raises inflation; (2) the Friedman hypothesis that inflation raises inflation volatility; and (3) the Black hypothesis that output volatility raises output growth, and that output volatility reduces inflation. For Brazil, we do not find any evidence of a systematic relationship between inflation and output growth.

► We study the relationship between output and inflation using EGARCH model.
► For India and South Africa, we find that inflation volatility raises inflation.
► For India and South Africa we find that inflation raises inflation volatility.
► For India and South Africa output volatility raises output growth.
► Output volatility reduces inflation for India and South Africa.
► For Brazil, no significant relationship between inflation and output is found.