Inflation and Inflation Uncertainty in the United Kingdom: Evidence from GARCH modelling
AbstractThis paper examines the relationship between inflation-uncertainty and the impact of inflation targeting using British data over the period 1972-2002. Uncertainty is proxied using the estimated conditional volatility from symmetric, asymmetric, and component GARCH-M models of inflation. The results indicate a positive relationship between past inflation and current uncertainty. We control for the indirect effect of lower average inflation throughout the last decade of inflation targeting and find that the adoption of an explicit target eliminates inflation persistence and reduces long-run uncertainty. Monetary authorities of implicit targeting countries should consider the extra benefits associated with formal targets.
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Bibliographic InfoPaper provided by Economics and Finance Section, School of Social Sciences, Brunel University in its series Economics and Finance Discussion Papers with number 02-28.
Length: 21 pages
Date of creation: Nov 2002
Date of revision:
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Postal: Brunel University, Uxbridge, Middlesex UB8 3PH, UK
Other versions of this item:
- Kontonikas, A., 2004. "Inflation and inflation uncertainty in the United Kingdom, evidence from GARCH modelling," Economic Modelling, Elsevier, vol. 21(3), pages 525-543, May.
- A. Kontonikas, 2002. "Inflation and Inflation Uncertainty in the United Kingdom: Evidence from GARCH modelling," Public Policy Discussion Papers 02-28, Economics and Finance Section, School of Social Sciences, Brunel University.
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