Robert J. Barro analyzes the relationship between inflation and economic growth using data from 100 countries between 1960 and 1990. His findings suggest that higher inflation reduces the growth rate of real per capita GDP by 0.2-0.3 percentage points per year and lowers the investment-to-GDP ratio by 0.4-0.6 percentage points. These results are based on regression analyses that use plausible instruments for inflation, indicating potential causal links between inflation and economic performance. However, statistically significant results are only observed when high-inflation experiences are included in the sample. While the immediate effects of inflation on growth appear small, long-term effects on living standards are substantial. For example, a 10 percentage point increase in annual inflation could lower real GDP by 4-7% after 30 years. Barro also explores the effects of inflation on investment, finding that higher inflation reduces the investment ratio, with the most significant effects observed when high-inflation observations are included. He discusses the challenges of identifying causality in inflation's impact on growth, noting that inflation is an endogenous variable and may be influenced by other factors. Barro proposes using instrumental variables, such as central bank independence and colonial status, to better isolate the effects of inflation on growth. His analysis concludes that inflation has a significant negative impact on economic growth and investment, supporting the importance of price stability for long-term economic performance.Robert J. Barro analyzes the relationship between inflation and economic growth using data from 100 countries between 1960 and 1990. His findings suggest that higher inflation reduces the growth rate of real per capita GDP by 0.2-0.3 percentage points per year and lowers the investment-to-GDP ratio by 0.4-0.6 percentage points. These results are based on regression analyses that use plausible instruments for inflation, indicating potential causal links between inflation and economic performance. However, statistically significant results are only observed when high-inflation experiences are included in the sample. While the immediate effects of inflation on growth appear small, long-term effects on living standards are substantial. For example, a 10 percentage point increase in annual inflation could lower real GDP by 4-7% after 30 years. Barro also explores the effects of inflation on investment, finding that higher inflation reduces the investment ratio, with the most significant effects observed when high-inflation observations are included. He discusses the challenges of identifying causality in inflation's impact on growth, noting that inflation is an endogenous variable and may be influenced by other factors. Barro proposes using instrumental variables, such as central bank independence and colonial status, to better isolate the effects of inflation on growth. His analysis concludes that inflation has a significant negative impact on economic growth and investment, supporting the importance of price stability for long-term economic performance.