Levine and Renelt (1992), for example, found no robust relationship in exhaustive crosssection studies, and many researchers using other techniques have also failed to detect a significant relationship.10 The problem may lie in identifying the direction of causation: In the short-to-medium run, causality may run from higher growth to higher inflation, as business-cycle pressures push spending and activity above the economy's capacity.
This direction of causality may obscure the negative relationship, running from higher inflation to lower growth, presumed to hold in the longer term. Of course, as a central banker, it makes sense to me that lower and more-stable inflation, by making the returns to saving and investment more predictable and by diminishing the likelihood of shocks to the financial system, should encourage economic growth.