K. Hviding, J. Thornton - Does Inflation Affect Productivity Growth in the G7 Economies?

Inflation and the level of total factor, capital and labor productivity are integrated of the same order and are cointegrated in each of the G7 countries. The long-run relationship is mainly negative, the magnitude generally small, and there is no strong pattern of Granger causality between inflation and productivity in the short-run. Also, inflation shocks appear to have a negligible effect on productivity in the United States in both the short-and long-run; in Germany, Japan, and the United Kingdom the long-run adverse effects are more substantial.