On Inflation and the Persistence of Shocks to Output
AbstractThis paper empirically investigates the possibility that the effects of shocks to output depend on the level of inflation. The analysis extends Elwood’s (1998) framework by incorporating in the model an inflation-threshold process that can potentially influence the stochastic properties of output. The value of this threshold parameter, if it exists, is considered to be unknown and is estimated in the model. The results indicate that shocks to output indeed have asymmetric effects, depending on the level of inflation: negative shocks are more detrimental when inflation is high, and positive shocks are more persistent when inflation is low.
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Bibliographic InfoPaper provided by Bank of Canada in its series Working Papers with number 01-22.
Length: 29 pages
Date of creation: 2001
Date of revision:
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Econometric and statistical methods; Inflation: costs and benefits;
Other versions of this item:
- Maral Kichian and Richard Luger, Bank of Canada, 2001. "On Inflation and the Persistence of shocks to Output," Computing in Economics and Finance 2001 184, Society for Computational Economics.
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Tom Doan, . "RATS programs to replicate Hansen's threshold estimation and testing results," Statistical Software Components RTZ00091, Boston College Department of Economics.
- Andrews, Donald W K, 1993.
"Tests for Parameter Instability and Structural Change with Unknown Change Point,"
Econometric Society, vol. 61(4), pages 821-56, July.
- Donald W.K. Andrews, 1990. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Cowles Foundation Discussion Papers 943, Cowles Foundation for Research in Economics, Yale University.
- Simon M. Potter, 1993.
"A Nonlinear Approach to U.S. GNP,"
UCLA Economics Working Papers
693, UCLA Department of Economics.
- Beaudry, Paul & Koop, Gary, 1993. "Do recessions permanently change output?," Journal of Monetary Economics, Elsevier, vol. 31(2), pages 149-163, April.
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