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Spillover Effects of Real and Nominal Uncertainties in India

Author

Listed:
  • B. Balaji

    (Pondicherry University)

  • S. Raja Sethu Durai

    (Pondicherry University
    University of Hyderabad)

  • M. Ramachandran

    (Pondicherry University)

Abstract

This paper examines the spillover effects and the causality between inflation, output growth and its uncertainties for India. Using monthly data for the period from April 1980 to April 2011, we estimated a bi-variate GARCH in mean with BEKK representations. This study differs from the earlier works where the parameters in the BEKK representations are estimated individually and the inferences are drawn on the basis of the individual lagged variance, covariance, and error terms from the respective equations. The empirical evidence suggests that inflation uncertainty seems to have significant negative impact on output growth and positive impact on output uncertainty and there is a positive influence of output uncertainty on the inflation. More importantly, there are spillovers and volatility transmission effects between the macroeconomic uncertainties where the volatility in output growth is significantly influenced by the shocks and volatility in inflation.

Suggested Citation

  • B. Balaji & S. Raja Sethu Durai & M. Ramachandran, 2018. "Spillover Effects of Real and Nominal Uncertainties in India," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 16(1), pages 143-162, December.
    • Handle: RePEc:spr:jqecon:v:16:y:2018:i:1:d:10.1007_s40953-017-0108-1
    DOI: 10.1007/s40953-017-0108-1
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    More about this item

    Keywords

    Macroeconomic uncertainties; Inflation; Growth; BEKK-GARCH in mean;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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