Economic theory is inconclusive on the linkage between inflation and econom
ic growth. Most existing evidence points to negative effects of inflation o
n growth emerging only at quite high levels of inflation. Making use of the
spline regression technique, levels of inflation below 3% are found to be
positively associated with growth while higher levels of inflation are nega
tively associated with growth. This sample consists of all countries with d
ata of quality C or better and the data is five-yearly averaged, with infla
tion being captured by a geometric average. The underlying model is the Man
kiw et al. (1992) adaptation of the Solow-Swan model.