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Does Lower Inflation Imply Lower Price Uncertainty?

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Author Info
Tsyplakov Alexander ()

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Abstract

This paper investigates the well-known hypothesis that the higher the rate of inflation, the higher is price uncertainty. Regressions with heteroskedastic errors are applied in order to model inflationary uncertainty in the Russian economy and to study its possible link with inflation. Using monthly data for Russia, some weak evidence of this link was found. Furthermore, Russian experience with respect to the level and uncertainty of inflation was compared with that of other countries. This study confirms that a strong relationship between inflation and uncertainty in the cross-country data does exist. The conclusion is that the Russian experience in this respect fits well with the world experience.

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Publisher Info
Paper provided by EERC Research Network, Russia and CIS in its series EERC Working Paper Series with number 2k-06e.

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Length: 33 pages
Date of creation: 30 Mar 2001
Date of revision:
Handle: RePEc:eer:wpalle:2k-06e

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Related research
Keywords: Russia; inflation; inflation uncertainty; GARCH;

Find related papers by JEL classification:
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General

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References listed on IDEAS
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  1. Foster, Edward, 1978. "The Variability of Inflation," The Review of Economics and Statistics, MIT Press, vol. 60(3), pages 346-50, August. [Downloadable!] (restricted)
  2. Driffill, John & Mizon, Grayham E. & Ulph, Alistair, 1990. "Costs of inflation," Handbook of Monetary Economics, in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 2, chapter 19, pages 1013-1066 Elsevier. [Downloadable!] (restricted)
    Other versions:
  3. Sinn, Hans-Werner, 1999. "Inflation and Welfare: Comment on Robert Lucas," CEPR Discussion Papers 2111, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  4. Robert E. Lucas, Jr., 2000. "Inflation and Welfare," Econometrica, Econometric Society, vol. 68(2), pages 247-274, March.
  5. Friedman, Milton, 1977. "Nobel Lecture: Inflation and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 451-72, June. [Downloadable!] (restricted)
  6. Baillie, Richard T & Chung, Ching-Fan & Tieslau, Margie A, 1996. "Analysing Inflation by the Fractionally Integrated ARFIMA-GARCH Model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(1), pages 23-40, Jan.-Feb.. [Downloadable!] (restricted)
  7. Culver, Sarah E & Papell, David H, 1997. "Is There a Unit Root in the Inflation Rate? Evidence from Sequential Break and Panel Data Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(4), pages 435-44, July-Aug.. [Downloadable!]
  8. Logue, Dennis E & Willett, Thomas D, 1976. "A Note on the Relation between the Rate and Variability of Inflation," Economica, London School of Economics and Political Science, vol. 43(17), pages 151-58, May. [Downloadable!] (restricted)
  9. Evans, Martin, 1991. "Discovering the Link between Inflation Rates and Inflation Uncertainty," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(2), pages 169-84, May. [Downloadable!] (restricted)
  10. Allan D. Brunner & Gregory D. Hess, 1990. "Are higher levels of inflation less predictable? A state-dependent conditional heteroskedasticity approach," Finance and Economics Discussion Series 141, Board of Governors of the Federal Reserve System (U.S.).
    Other versions:
  11. Martin Evans & Paul Wachtel, 1993. "Inflation regimes and the sources of inflation uncertainty," Proceedings, Federal Reserve Bank of Cleveland, pages 475-520.
  12. Ball, Laurence, 1992. "Why does high inflation raise inflation uncertainty?," Journal of Monetary Economics, Elsevier, vol. 29(3), pages 371-388, June. [Downloadable!] (restricted)
    Other versions:
  13. Holland, A Steven, 1993. "Uncertain Effects of Money and the Link between the Inflation Rate and Inflation Uncertainty," Economic Inquiry, Oxford University Press, vol. 31(1), pages 39-51, January.
  14. Pagan, A R & Hall, A D & Trivedi, P K, 1983. "Assessing the Variability of Inflation," Review of Economic Studies, Blackwell Publishing, vol. 50(4), pages 585-96, October. [Downloadable!] (restricted)
  15. Paldam, Martin, 1994. "The political economy of stopping high inflation," European Journal of Political Economy, Elsevier, vol. 10(1), pages 135-168, May. [Downloadable!] (restricted)
  16. John E. Golob, 1993. "Inflation, inflation uncertainty, and relative price variability: a survey," Research Working Paper 93-15, Federal Reserve Bank of Kansas City.
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