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Causal relations between inflation and inflation uncertainty—Cross sectional evidence in favour of the Friedman–Ball hypothesis

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  • Hartmann, Matthias
  • Herwartz, Helmut
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    Abstract

    We test for causality between inflation and its associated uncertainty by means of both in-sample and out-of-sample modelling. Our findings indicate that the impact of inflation on inflation uncertainty is more pronounced than the reverse causal effect.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0165176511005593
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    Bibliographic Info

    Article provided by Elsevier in its journal Economics Letters.

    Volume (Year): 115 (2012)
    Issue (Month): 2 ()
    Pages: 144-147

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    Handle: RePEc:eee:ecolet:v:115:y:2012:i:2:p:144-147

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    Web page: http://www.elsevier.com/locate/ecolet

    Related research

    Keywords: Inflation uncertainty; Inflation forecasting; Granger causality;

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    References

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    1. Laurence Ball, 1990. "Why Does High Inflation Raise Inflation Uncertainty?," NBER Working Papers 3224, National Bureau of Economic Research, Inc.
    2. Davis, George K & Kanago, Bryce E, 2000. "The Level and Uncertainty of Inflation: Results from OECD Forecasts," Economic Inquiry, Western Economic Association International, vol. 38(1), pages 58-72, January.
    3. Friedman, Milton, 1977. "Nobel Lecture: Inflation and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 451-72, June.
    4. Soosung Hwang & Pedro L. Valls Pereira, 2006. "Small sample properties of GARCH estimates and persistence," The European Journal of Finance, Taylor & Francis Journals, vol. 12(6-7), pages 473-494.
    5. Daal, Elton & Naka, Atsuyuki & Sanchez, Benito, 2005. "Re-examining inflation and inflation uncertainty in developed and emerging countries," Economics Letters, Elsevier, vol. 89(2), pages 180-186, November.
    6. Canova, Fabio, 2007. "G-7 Inflation Forecasts: Random Walk, Phillips Curve Or What Else?," Macroeconomic Dynamics, Cambridge University Press, vol. 11(01), pages 1-30, February.
    7. Helmut Herwartz, 2010. "A note on model selection in (time series) regression models - general-to-specific or specific-to-general?," Applied Economics Letters, Taylor & Francis Journals, vol. 17(12), pages 1157-1160.
    8. Ser-Huang Poon & Clive W.J. Granger, 2003. "Forecasting Volatility in Financial Markets: A Review," Journal of Economic Literature, American Economic Association, vol. 41(2), pages 478-539, June.
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    Cited by:
    1. Wojciech Charemza & Carlos Diaz Vela & Svetlana Makarova, 2013. "Inflation fan charts, monetary policy and skew normal distribution," Discussion Papers in Economics 13/06, Department of Economics, University of Leicester.
    2. Bouoiyour, Jamal & Selmi, Refk, 2013. "Nonlinearities and the nexus between inflation and inflation uncertainty in Egypt: New evidence from wavelets transform framework," MPRA Paper 52414, University Library of Munich, Germany.
    3. Steffen Ahrens & Matthias Hartmann, 2014. "State-dependence vs. Time-dependence: An Empirical Multi-Country Investigation of Price Sluggishness," Kiel Working Papers 1907, Kiel Institute for the World Economy.

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