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The Relationship between the Level and Variability of Inflation: Theory and Evidence

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  • Demetriades, Panikos O

Abstract

This paper emphasizes the role played by asymmetric stabilization policies in producing the widely reported positive association between the level and variability of inflation. A simple theoretical model is constructed which shows how asymmetric policies give rise to this association. The empirical findings presented provide support to the proposition that variations in inflation uncertainty are policy-induced. Copyright 1989 by John Wiley & Sons, Ltd.

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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 4 (1989)
Issue (Month): 3 (July-September)
Pages: 239-50

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Handle: RePEc:jae:japmet:v:4:y:1989:i:3:p:239-50

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References

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  1. Cukierman, Alex & Wachtel, Paul, 1982. "Inflationary Expectations: Reply and Further Thoughts on Inflation Uncertainty," American Economic Review, American Economic Association, vol. 72(3), pages 508-12, June.
  2. Lucas, Robert E, Jr, 1973. "Some International Evidence on Output-Inflation Tradeoffs," American Economic Review, American Economic Association, vol. 63(3), pages 326-34, June.
  3. Logue, Dennis E & Willett, Thomas D, 1976. "A Note on the Relation between the Rate and Variability of Inflation," Economica, London School of Economics and Political Science, vol. 43(17), pages 151-58, May.
  4. Foster, Edward, 1978. "The Variability of Inflation," The Review of Economics and Statistics, MIT Press, vol. 60(3), pages 346-50, August.
  5. Pagan, A R & Hall, A D & Trivedi, P K, 1983. "Assessing the Variability of Inflation," Review of Economic Studies, Wiley Blackwell, vol. 50(4), pages 585-96, October.
  6. Barro, Robert J., 1976. "Rational expectations and the role of monetary policy," Journal of Monetary Economics, Elsevier, vol. 2(1), pages 1-32, January.
  7. Demetriades, Panikos, 1988. "Macroeconomic aspects of the correlation between the level and variability of inflation," Economics Letters, Elsevier, vol. 26(2), pages 121-124.
  8. Cukierman, Alex & Wachtel, Paul, 1979. "Differential Inflationary Expectations and the Variability of the Rate of Inflation: Theory and Evidence," American Economic Review, American Economic Association, vol. 69(4), pages 595-609, September.
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Citations

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Cited by:
  1. Pesaran, M. Hashem & Weale, Martin, 2006. "Survey Expectations," Handbook of Economic Forecasting, Elsevier.
  2. Paulo Drummond, 1993. "Optimum pricing policy, government induced shocks and the dispersion of relative prices in Brazil," Revista Brasileira de Economia, FGV/EPGE Escola Brasileira de Economia e Finan├žas, Getulio Vargas Foundation (Brazil), vol. 47(4), pages 503-532, October.
  3. Madureira, Leonardo, 2007. "The ex ante real rate and inflation premium under a habit consumption model," Journal of Empirical Finance, Elsevier, vol. 14(3), pages 355-382, June.
  4. Christos Ioannidis & Mick Silver, 2001. "The influence of inflation on differential price changes across European markets," Atlantic Economic Journal, International Atlantic Economic Society, vol. 29(1), pages 31-47, March.
  5. Mitchell, James & Mouratidis, Kostas & Weale, Martin, 2007. "Uncertainty in UK manufacturing: Evidence from qualitative survey data," Economics Letters, Elsevier, vol. 94(2), pages 245-252, February.

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