Testing for rate dependence and asymmetry in inflation uncertainty: Evidence from the G7 economies
AbstractThe Friedman-Ball hypothesis implies a link between the inflation rate and inflation uncertainty. In this paper we employ a new test for the joint null hypothesis of no dependence effects and no asymmetry in the G7 inflation volatility. The results show that higher inflation rates operate additively via the conditional variance of inflation to induce greater inflation uncertainty in the U.S., U.K. and Canada. In addition, positive inflationary shocks are found to generate greater inflation uncertainty than negative shocks of a similar magnitude in the U.K. and Canada.
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Bibliographic InfoArticle provided by Elsevier in its journal Economics Letters.
Volume (Year): 94 (2007)
Issue (Month): 3 (March)
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Web page: http://www.elsevier.com/locate/ecolet
Other versions of this item:
- Sandy Suardi & O.T.Henry & N. Olekalns, . "Testing for Rate-Dependence and Asymmetry in Inflation Uncertainty: Evidence from the G7 Economies," MRG Discussion Paper Series 0306, School of Economics, University of Queensland, Australia.
- Olan T. Henry & Nilss Olekalns & Sandy Suardi, 2006. "Testing for Rate-Dependence and Asymmetry in Inflation Uncertainty:Evidence from the G7 Economies," Department of Economics - Working Papers Series 959, The University of Melbourne.
- E39 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Other
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