Article ID Journal Published Year Pages File Type
963708 Journal of International Money and Finance 2007 22 Pages PDF
Abstract
We use univariate GARCH models of inflation and output growth and monthly data for the G7 covering the 1957-2000 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.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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