The links between inflation, inflation uncertainty and output growth: New time series evidence from Japan

Wilson, Bradley K.

doi:10.1016/j.jmacro.2004.11.004

Cited by 79 publications

(61 citation statements)

References 35 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…The Friedman-Ball hypothesis is supported, for example, by: Grier and Perry (1998) [13], Daal et al (2005) [14], Thornton (2008) [15], Keskek and Orhan (2010) [16], and Karahan (2012) [17]. On the other hand, the Cukierman and Meltzer hypothesis is supported by the findings of Conrad and Karanasos (2005) [18], Wilson (2006) [19], and Fountas (2010) [20]. Keskek and Orhan (2010) [16] found support for the stabilizing Fed hypothesis in the case of Turkey, and Thornton (2007) [21] found evidence for this hypothesis in Colombia, Mexico and Turkey.…”

Section: Literature Reviewmentioning

confidence: 95%

Inflation and Inflation Uncertainty Revisited: Evidence from Egypt

Sharaf

2015

Economies

View full text Add to dashboard Cite

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.

show abstract

Section: Literature Reviewmentioning

confidence: 95%

Inflation and Inflation Uncertainty Revisited: Evidence from Egypt

Sharaf

2015

Economies

View full text Add to dashboard Cite

show abstract

“…By definition, the variance of money growth is equal to 2 ( ) t E μ μ − . Using equation (27) and the specified stochastic process we get …”

Section: Resultsmentioning

confidence: 99%

“…More importantly, we can notice from (27) that money growth is a non-linear function of the random policy variable t γ , contrary to scenarios where public spending is financed by proportional income taxation -scenarios which result in a linear proportionality between the tax rate and the government spending-to-output ratio. The nonlinear relation in the present framework arises because aggregate money demand represents the base on which the public sector relies in order to extract seignorage revenues.…”

mentioning

confidence: 92%

“…Equation (27) lays out the characteristic that distinguishes this model from existing theoretical analyses on the nominal volatility -economic growth nexus. Similarly to these analyses, it shows that the money growth rate is stochastic.…”

mentioning

confidence: 99%

“…Given (27) and (30), this optimal response will be identified through the presence of the term Z in (32). It is of particular importance because this will determine, to a large extent, the effect of policy variability on the trend of output growth.…”

mentioning

confidence: 99%

See 2 more Smart Citations

Inflation, volatile public spending, and endogenously sustained growth

Varvarigos

2010

Journal of Economic Dynamics and Control

View full text Add to dashboard Cite

I construct a model of an economy whose government finances volatile public spending via money creation. The model jointly accounts for the emergence of some well-known empirical observations. Specifically, it predicts a negative correlation between output growth and policy volatility. Furthermore, given that both the mean and the variance of the inflation rate are elevated by fluctuations in public spending, the model provides a novel theoretical justification for the simultaneous negative correlation of long-run growth with both average inflation and inflation variability. The model also supports the view that policy volatility reduces social welfare.

show abstract