On inflation and inflation uncertainty in the G7 countries

Grier, Kevin; Perry, Mark

doi:10.1016/s0261-5606(98)00023-0

Cited by 246 publications

(254 citation statements)

References 23 publications

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“…In general, the evidence is mixed. Baillie et al (1996) find evidence supporting the link between the two variables for the UK and some highinflation countries, whereas Grier and Perry (1998) in their G7 study find evidence in favor of the CukiermaneMeltzer hypothesis for some countries and in favor of the Holland hypothesis for other countries. Fountas et al (2004a) and Conrad and Karanasos (2005b) also obtain mixed evidence.…”

Section: The Empirical Evidencementioning

confidence: 92%

“…3 In the presence of this uncertainty, the policymaker applies an expansionary monetary policy in order to surprise the agents and enjoy output gains. This argument implies a positive causal effect from inflation uncertainty to inflation and has been dubbed by Grier and Perry (1998) the CukiermaneMeltzer hypothesis. Holland (1995) has supplied a different argument based on the stabilization motive of the monetary authority, the so-called 'stabilizing Fed hypothesis'.…”

Section: The Impact Of Inflation Uncertainty On Inflationmentioning

confidence: 99%

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Inflation, output growth, and nominal and real uncertainty: Empirical evidence for the G7

Fountas

Karanasos

2007

Journal of International Money and Finance

161

127

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We use univariate GARCH models of inflation and output growth and monthly data for the G7 covering the 1957e2000 period to test for the causal effect of real and nominal macroeconomic uncertainty on inflation and output growth, and the effect of inflation on inflation uncertainty. Our evidence supports a number of important conclusions. First, inflation is a positive determinant of uncertainty about inflation. Second, output growth uncertainty is a positive determinant of the output growth rate. Third, there is mixed evidence regarding the effect of inflation uncertainty on inflation and output growth. Hence, uncertainty about the inflation rate is not necessarily detrimental to economic growth. Finally, there is not much evidence supporting the hypothesis that output uncertainty raises inflation.

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Section: The Empirical Evidencementioning

confidence: 92%

Section: The Impact Of Inflation Uncertainty On Inflationmentioning

confidence: 99%

Inflation, output growth, and nominal and real uncertainty: Empirical evidence for the G7

Fountas

Karanasos

2007

Journal of International Money and Finance

161

127

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“…Ball (1992), Brunner and Hess (1993) and Perry (1998, 2000) provide empirical evidence suggesting a positive association between inflation and its variance. However, another strand of the literature argues that higher inflation uncertainty leads to a rise in the optimal inflation rate (Cukierman and Meltzer 1986;Cukierman 1992) with empirical evidence provided by Grier and Perry (1998) and . Holland (1993Holland ( , 1995 suggests that inflation uncertainty may lower the average inflation rate, provided that the central bank tries to minimize welfare losses arising from more inflation uncertainty.…”

Section: Introductionmentioning

confidence: 99%

The inflation and inflation uncertainty relationship for Turkey: a dynamic framework

2010

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This article assesses the interaction between inflation and inflation uncertainty in a dynamic framework for Turkey by using monthly data for the time period 1984-2009. The bulk of previous studies investigating the link between inflation and inflation uncertainty employ Autoregressive Conditional Heteroskedasticity (ARCH)-type models, which consider inflation uncertainty as a predetermined function of innovations to inflation specification. The stochastic volatility in mean (SVM) models that we use allow for gathering innovations to inflation uncertainty and assess the effect of inflation volatility shocks on inflation over time. When we assess the interaction between inflation and its volatility, the empirical findings indicate that response of inflation to inflation volatility is positive and statistically significant. However, the response of inflation volatility to inflation is negative but not statistically significant.

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“…2 These models offer a direct test for the statistical significance of the time variation of inflation's conditional variance (Engle 1982); the causal relationship between inflation and inflation uncertainty, rate dependence (Grier and Perry, 1998); and differences in the response of inflation uncertainty to the sign and size of inflationary shocks, an asymmetry effect (Daal et al, 2005). Cox, Ingersoll and Ross (1985) provide two models for inflation dynamics both of which imply rate dependence; a positive correlation between the level of the rate of inflation and the volatility of inflation.…”

Section: Introductionmentioning

confidence: 99%

“…2 Nas andPerry (1998), Fountas (2001), Hwang (2001), Apergis (2004) and Kontonicas (2004) employ GARCH models in studying the relationship between inflation and its uncertainty. 3 See, amongst others, Grier and Perry (1998) and Daal et al (2005). absolute magnitude.…”

Section: Introductionmentioning

confidence: 99%

Testing for rate dependence and asymmetry in inflation uncertainty: Evidence from the G7 economies

2007

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The Friedman-Ball hypothesis implies a link between the inflation rate and inflation uncertainty. In this paper we employ a new test for the joint null hypothesis of no dependence effects and no asymmetry in the G7 inflation volatility. The results show that higher inflation rates operate additively via the conditional variance of inflation to induce greater inflation uncertainty in the U.S., U.K. and Canada. In addition, positive inflationary shocks are found to generate greater inflation uncertainty than negative shocks of a similar magnitude in the U.K. and Canada.

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On inflation and inflation uncertainty in the G7 countries

Cited by 246 publications

References 23 publications

Inflation, output growth, and nominal and real uncertainty: Empirical evidence for the G7

Inflation, output growth, and nominal and real uncertainty: Empirical evidence for the G7

The inflation and inflation uncertainty relationship for Turkey: a dynamic framework

Testing for rate dependence and asymmetry in inflation uncertainty: Evidence from the G7 economies

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