Uncertainty shocks and inflation dynamics in the U.S.

Haque, Qazi; Magnusson, Leandro M.

doi:10.1016/j.econlet.2021.109825

Cited by 24 publications

(10 citation statements)

References 28 publications

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“…They interpret this result with a new Keynesian model featuring sticky prices and frictions on the labor market. Haque and Magnusson ( 2021 ) find that this conclusion is robust to admitting parameter instability in a VAR modeling inflation, uncertainty, and a battery of other macroeconomic indicators. Going back to Leduc and Liu's (2016) framework, Fasani and Rossi ( 2018 ) show that the negative response of inflation in their model can become positive when modeling interest rate inertia.…”

Section: Domestic Uncertainty: Ten Takeawaysmentioning

confidence: 92%

Uncertainty before and during COVID‐19: A survey

Castelnuovo

2022

Journal of Economic Surveys

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This survey features three parts. The first one reviews the most recent literature on the relationship between domestic (i.e., country‐specific) uncertainty and the business cycle, and offers ten main takeaways. The second part surveys contributions to the fast‐growing strand of the literature that focuses on the macroeconomic effects of uncertainty spillovers and global uncertainty. The last part presents contributions on the role played by uncertainty during the COVID‐19 pandemic.

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Section: Domestic Uncertainty: Ten Takeawaysmentioning

confidence: 92%

Uncertainty before and during COVID‐19: A survey

Castelnuovo

2022

Journal of Economic Surveys

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“…Jones and Olson ( 2013 ) reveal that the relationship between uncertainty and inflation changed from positive to negative during the mid-to late 1990s, a reflection of asymmetry. Hague and Magnusson's ( 2021 ) TVP-VAR further indicates that inflation is negative in the post-WWII period. While Athari et al ( 2021 ) show the heterogeneous reaction of Japan’s inflation to EPU, Meinen and Roeche’s (2018) SVAR approach shows the ambiguous response of inflation to uncertainty.…”

Section: Literature Reviewmentioning

confidence: 99%

“…However, the assessment of the relationship between uncertainty due to economic and political shocks and inflation is still nascent and has not yet reached a conclusion (Jones and Olson 2013 ; Leduc and Liu 2016 ; Meinen and Roeche 2018 ; Hague and Magnusson 2021 ; Caldara et al 2022 ). The admixture could be attributed to the fact that the inflationary effects on the supply side may offset the deflationary effects of slacking aggregate demand (Caldara et al 2022 ).…”

Section: Literature Reviewmentioning

confidence: 99%

“…The admixture could be attributed to the fact that the inflationary effects on the supply side may offset the deflationary effects of slacking aggregate demand (Caldara et al 2022 ). While literature has further shown that inflation volatility can be induced by demand and supply shocks, oil price shocks, fiscal policy and exchange rate variations (Charnavoki and Dolado 2014 ), the nexus of uncertainties and inflation dynamics has been said to be theoretically mixed (Hague and Magnusson 2021 ). Increased uncertainty makes firms delay their spending and investment plans.…”

Section: Literature Reviewmentioning

confidence: 99%

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Uncertainty measures and inflation dynamics in selected global players: a wavelet approach

Adeosun

Tabash

et al. 2022

Qual Quant

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This study investigates the dynamic relationship between economic policy uncertainty (EPU), geopolitical risks (GPR), the interaction of EPU and GPR (EPGR), and inflation in the USA, Canada, the UK, Japan, and China. We employ the continuous wavelet transform (CWT) to track the evolution of model variables and the wavelet coherence (WC) to examine the co-movement and lead-lag status of the series across different frequencies and time. To strengthen the WC, we apply the multiple wavelet coherence (MWC) to determine how good the linear combination of independent variables co-moves with inflation across various time-frequency domains. The CWT reveals heterogeneous characteristics in the evolution of each variable across frequencies. Inflation across samples shows strong variance in the short-term and medium-term while the volatility fizzles out in the long-term. For the explanatory variables, a similar pattern holds for EPU except for Japan and China, where coherence is evident in the short-term. The USA’s and Canada’s GPR reveal strong coherence in the short- and medium-term. Also, the UK and China reflect strong coherence in the short-term but weak significance in the medium-term, while Japan’s GPR reflects only strong coherence in the short-term. The EPGR shows strong variation in the short-and-medium-term in the samples except in China. The WC’s phase-difference reflects bidirectional causalities and switches in signs among series across different scales and periods in the samples, while the MWC reveals the combined intensity, strength, and significance of both EPU and GPR in predicting inflation across frequency bands among the countries. Findings also show significant co-movement among series at date-stamped periods, corroborating critical global events such as the Asian financial crisis, Global financial crisis, and COVID-19 pandemic. The paper has policy implications.

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“…3 See, e.g., , , , Caggiano et al (2014), , Segal et al (2015), Fernández-Villaverde et al (2015), , , Scotti (2016), Chavleishvili and Manganelli (2019), Haque and Magnusson (2021). These papers identify one shock using a recursive method.…”

Section: Introductionmentioning

confidence: 99%