Inflation crisis and the total factor productivity in Latin America

In this paper we analyze the long-run effects of inflation crises periods over Total Factor Productivity (TFP) growth for 18 Latin American countries during the 1961-2000 period, using the Generalized Method of Moments (GMM) in a dynamic panel data model. We find that there are non-linear effects of inflation over TFP growth, that is: high inflation levels have a negative effect on productivity growth (what is in line with endogenous-growth models), whereas lower inflation periods do not have permanent effects over productivity growth (what is in line with predictions of monetary theory). Additionally, we also find that inflation volatility has negative effects on TFP growth. Moreover, our results are robust to a set of control variables, such as supply shocks, trade openness and fiscal burden.