Inflation as Reflecting Macroeconomic Gaps: An Analysis for Emerging Economies

This article is tested for the hypothesis regarding the causality relationships between a macroeconomic gap, especially the investment-domestic savings' gap, and the inflation rate. For empirical purposes, Dumitrescu and Hurlin (Econ Modell 29:1450-1460, 2012) method forGranger causality in panel datawas applied to the annual series from 1995 to 2014, covering a group of 50 emerging and developing countries. The empirical findings indicated a corroboration of the tested hypothesis, according to which an increase in the macroeconomic gap is accompanied by a rise in inflation rates.