Inflation in the Economic Growth–Poverty Nexus: Evidence from Subnational Panel Data in a Developing Economy

Andi Herman Jaya

doi:10.62794/je3s.v7i4.432

Authors

Andi Herman Jaya Universitas Tadulako, Indonesia

DOI:

https://doi.org/10.62794/je3s.v7i4.432

Keywords:

economic growth, inflation, poverty, subnational development, panel data

Abstract

Poverty remains a persistent development challenge across subnational economies despite substantial differences in regional growth performance. This study examines the relationships among economic growth, inflation, and poverty and evaluates the intervening role of inflation in the growth–poverty nexus using subnational panel data for the 2020–2025 period. Secondary data were compiled primarily from official national statistical publications, covering 122 regional units. Panel data regression was employed with regional and year effects, while model specification was determined separately for each equation and statistical inference was evaluated using robust procedures. The analytical framework distinguishes the direct association between economic growth and poverty from the indirect component operating through inflation. Given the contemporaneous and observational nature of the data, the intervening mechanism is interpreted as an associational panel relationship rather than definitive causal mediation. This framework recognizes that the transmission of economic growth into poverty reduction may operate through multiple channels, including price dynamics, employment creation, income distribution, human capital, social protection, and structural transformation. The study contributes to the regional development literature by integrating inflation into the analysis of heterogeneous growth–poverty relationships at the subnational level. The findings provide a framework for understanding why comparable economic growth outcomes may generate different poverty responses across regions and emphasize the importance of maintaining price stability alongside inclusive growth policies.

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