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, Society for Computational Economics 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:
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- Potter, Simon M, 1995. "A Nonlinear Approach to US GNP," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 10(2), pages 109-25, April-Jun.
- Beaudry, Paul & Koop, Gary, 1993. "Do recessions permanently change output?," Journal of Monetary Economics, Elsevier, Elsevier, vol. 31(2), pages 149-163, April.
- Elwood, S. Kirk, 1998. "Is the persistence of shocks to output asymmetric?," Journal of Monetary Economics, Elsevier, Elsevier, vol. 41(2), pages 411-426, April.
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