Economics and Business Review

In theory the short-term relationship between inflation and GDP rate is
known as the positive slope straight line SAS. In practice it is reflected by a concave
non-monotonic function.
The results of estimation depend on unusual observations. We propose a simple
four-step procedure: first, basic estimation based on all observations; then estimation
having ignored outliers; next, estimation on the average GDP rates for given inflation
rates for the same observations; lastly, estimation skipping outlying averages.
Empirical analysis for 26 OECD countries on quarterly data brought satisfactory results.
They justified the determination of optimal GDP rate and corresponding inflation
for every country. Finally, recommendations for policymakers have been formulated.