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Macroeconomic Uncertainty and Performance in Asian Countries

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Author Info
Don Bredin () (University College Dubmlin)
John Elder () (North Dakota State University)
Stilianos Fountas () (Department of Economics, University of Macedonia)

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Abstract

We use a very general bivariate GARCH-M model and quarterly data for five Asian countries to test for the impact of real and nominal macroeconomic uncertainty on in°ation and output growth. We conclude the following. First, in the majority of countries uncertainty regarding the output growth rate is related negatively to the average growth rate. Second, contrary to expectations, infation uncertainty in most cases does not harm the output growth perfor- mance of an economy. Third, in°ation and output uncertainty have a mixed effect on inflation. Consistent results are found using the VAR-GARCH-M approach to investigate the dynamic relationship between in°ation and output growth using impulse response functions. This evidence implies that macroeconomic uncertainty may even improve macroeconomic performance, i.e., raise output growth and reduce inflation. Our empirical results highlight important differences with those for industrialized countries.

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Paper provided by Department of Economics, University of Macedonia in its series Discussion Paper Series with number 2008_10.

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Date of creation: Sep 2008
Date of revision: Sep 2008
Handle: RePEc:mcd:mcddps:2008_10

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Related research
Keywords: Inflation; Output growth; Uncertainty; GARCH models;

Find related papers by JEL classification:
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation and Testing
E0 - Macroeconomics and Monetary Economics - - General

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