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Inflation and Uncertainty: Does the EMS Participation Play Any Role?

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  • Apergis, Nicholas

    (University of Macedonia)

Abstract

This paper examines whether European Monetary System (EMS) member - ship has affected the link between inflation and inflation uncertainty. ARCH measures of conditional inflation volatility and Granger-causality tests for nine OECD countries over the period 1980-1994 indicate that in non-EMS coun - tries -in these countries a monetary target seems to have been closely followedinflation seems to determine the behaviour of inflation uncertainty. By con - trast, in EMS countries – these countries have geared their monetary policies to an exchange rate target – inflation seems to have no impact on inflation uncertainty. This finding is probably due first, to the absence of any institution - al restriction that characterises non-EMS membership, on the manner the monetary policy is pursued, and second, to the fact that under a monetary rule, any institutional or regulatory changes in the monetary sector are expected to fall more adversely upon inflation as well as inflation uncertainty.

Suggested Citation

  • Apergis, Nicholas, 1998. "Inflation and Uncertainty: Does the EMS Participation Play Any Role?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 13, pages 586-605.
    • Handle: RePEc:ris:integr:0089
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    More about this item

    Keywords

    Inflation; Uncertainty;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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