The Relationship Between Inflation, Output Growth, and Their Uncertainties: Evidence from Selected CEE Countries
AbstractIn this paper, we examine causal relationships between inflation rate, output growth rate, inflation uncertainty, and output uncertainty for ten Central and Eastern European transition countries. For this purpose, we estimate a bivariate GARCH model that includes output growth and inflation rates for each country. Then we use conditional standard deviations of inflation and output to proxy nominal and real uncertainty, respectively, and perform Granger causality tests. Our results suggest that inflation rate induces uncertainty about both inflation rate and output growth rate, which is detrimental to real economic activity. At the same time, we find that output growth rate reduces macroeconomic uncertainty in some countries. In addition, we also examine and discuss causal relationships between the remaining variables.
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Bibliographic InfoArticle provided by M.E. Sharpe, Inc. in its journal Emerging Markets Finance and Trade.
Volume (Year): 47 (2011)
Issue (Month): 0 (July)
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Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=111024
Granger causality tests; inflation; output growth; transition countries; uncertainty;
Other versions of this item:
- Mubariz Hasanov & Tolga Omay, 2012. "The Relationship between Inflation, output growth, and their Uncertainties: Evidence from selected CEE countries," Hacettepe University Department of Economics Working Papers 20128, Hacettepe University, Department of Economics.
- Hasanov, Mübariz & Omay, Tolga, 2010. "The relationship between inflation, output growth, and their uncertainties: Evidence from selected CEE countries," MPRA Paper 23764, University Library of Munich, Germany.
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
- E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
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