The effects of inflation on the predictability of price changes in Latin America: Some estimates and policy implications

Pourgerami, Abbas; Maskus, Keith E.

doi:10.1016/0305-750x(87)90083-0

Cited by 79 publications

(65 citation statements)

References 4 publications

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“…Pourgerami and Maskus (1987) and Ungar and Zilberfarb (1993), on the other hand, argue that agents may allocate more resources to inflation forecasting during higher inflationary periods, and thus inflation uncertainty may decline with increasing inflation rate.…”

Section: The Relationships Among Macroeconomic Uncertainties and Inflmentioning

confidence: 99%

“…Second, Brunner (1993) argues that a decline in output growth might generate uncertainty about policy reactions, and thus might increase inflation uncertainty. Third, if agents allocate more resources to inflation forecasting as Pourgerami and Maskus (1987) and Ungar and Zilberfarb (1993) argue, then output growth will reduce inflation uncertainty. Finally, note that the effect of output growth on output uncertainty is also ambiguous.…”

Section: The Relationships Among Macroeconomic Uncertainties and Outpmentioning

confidence: 99%

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The Relationship Between Inflation, Output Growth, and Their Uncertainties: Evidence from Selected CEE Countries

Hasanov

Omay

2011

Emerging Markets Finance and Trade

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Section: The Relationships Among Macroeconomic Uncertainties and Inflmentioning

confidence: 99%

Section: The Relationships Among Macroeconomic Uncertainties and Outpmentioning

confidence: 99%

The Relationship Between Inflation, Output Growth, and Their Uncertainties: Evidence from Selected CEE Countries

Hasanov

Omay

2011

Emerging Markets Finance and Trade

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“…According to Pourgerami and Maskus (1987) [9] higher inflation reduces inflation uncertainty as people invest resources to anticipate the future inflation rate better and to shelter themselves from its adverse effects. The same view was further developed by Ungar and Zilberfarb (1993) [11].…”

Section: Literature Reviewmentioning

confidence: 99%

Inflation and Inflation Uncertainty Revisited: Evidence from Egypt

Sharaf

2015

Economies

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Abstract:The welfare costs of inflation and inflation uncertainty are well documented in the literature and empirical evidence on the link between the two is sparse in the case of Egypt. This paper investigates the causal relationship between inflation and inflation uncertainty in Egypt using monthly time series data during the period January 1974-April 2015. To endogenously control for any potential structural breaks in the inflation time series, Zivot and Andrews (2002) and Clemente-Montanes-Reyes (1998) unit root tests are used. The inflation-inflation uncertainty relation is modeled by the standard two-step approach as well as simultaneously using various versions of the GARCH-M model to control for any potential feedback effects. The analyses explicitly control for the effect of the Economic Reform and Structural Adjustment Program (ERSAP) undertaken by the Egyptian government in the early 1990s, which affected inflation rate and its associated volatility. Results show a high degree of inflation-volatility persistence in the response to inflationary shocks. Granger-causality test along with symmetric and asymmetric GARCH-M models indicate a statistically significant bi-directional positive relationship between inflation and inflation uncertainty, supporting both the Friedman-Ball and the Cukierman-Meltzer hypotheses. The findings are robust to the various estimation methods and model specifications. The findings of this paper support the view of adopting inflation-targeting policy in Egypt, after fulfilling its preconditions, to reduce the welfare cost of inflation and its related uncertainties. Monetary authorities in Egypt should enhance the credibility of monetary policy and attempt to reduce inflation uncertainty, which will help lower inflation rates.

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“…The first hypothesis of Friedman, showing the role of inflation uncertainty in explaining the level of inflation, was formalized by Ball (1992) (we call this Friedman -Ball hypothesis). Afterwards, several competing hypothesis where advanced and become famous, showing the positive impact of inflation on its uncertainty (Cukierman and Meltzer, 1986), or on contrary, a negative relationship where the inflation leads uncertainty (Pourgerami and Maskus, 1987), or where the inflation is leaded by its uncertainty (Holland, 1995). 2 Campbell (1991) explains this reasoning by the fact that, if the stock returns are expected to rise in the distant future and if the path of dividends is fixed, then the stock price must drop in present to allow a rise in the future.…”

mentioning

confidence: 99%

Stock prices, inflation and inflation uncertainty in the U.S.: testing the long-run relationship considering Dow Jones sector indexes

2016

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We test for the long-run relationship between stock prices, inflation and its uncertainty for different U.S. sector stock indexes, over the period 2002M7 to 2015M10. For this purpose we use a cointegration analysis with one structural break to capture the crisis effect, and we assess the inflation uncertainty based on a time-varying unobserved component model. In line with recent empirical studies we discover that in the long-run, the inflation and its uncertainty negatively impact the stock prices, opposed to the well-known Fisher effect. In addition we show that for several sector stock indexes the negative effect of inflation and its uncertainty vanishes after the crisis setup. However, in the short-run the results provide evidence in the favor of a negative impact of uncertainty, while the inflation has no significant influence on stock prices, except for the consumption indexes. The consideration of business cycle effects confirms our findings, which proves that the results are robust, both for the long-and the short-run relationships.

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The effects of inflation on the predictability of price changes in Latin America: Some estimates and policy implications

Cited by 79 publications

References 4 publications

The Relationship Between Inflation, Output Growth, and Their Uncertainties: Evidence from Selected CEE Countries

The Relationship Between Inflation, Output Growth, and Their Uncertainties: Evidence from Selected CEE Countries

Inflation and Inflation Uncertainty Revisited: Evidence from Egypt

Stock prices, inflation and inflation uncertainty in the U.S.: testing the long-run relationship considering Dow Jones sector indexes

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