Relatinship between productivity and inflation in selected OIC Member countries

Investigation of relationship between inflation and productivity has been widely studied in recent decades. Due to high inflation rates in the Organization of Islamic Conference (OIC) members in the past years and the main role of productivity in economic growth, this subject has gained particular importance in the economies of OIC members. This study aims to investigate the relationship between inflation and productivity in OIC members in the period between 1998 and 2010 using panel Granger causality model and Generalized Method of Moments (GMM) estimation method. The results of Granger, Sims, and Toda-Yamamoto causality tests indicated that the correlation between inflation and productivity is one-directional, from inflation towards productivity. The results of GMM estimation suggested statistically significant negative correlation between inflation and productivity. In addition, results of Sargan and Arllano-Bond autocorrelation tests confirmed the lack of correlation between instruments and the error term and lack of autocorrelation in the second-order error difference in the model, indicating the validity of the findings

Keywords:

Productivity , Inflation , causality test , GMM , Sargan test