Testing for Rate-Dependence and Asymmetry in Inflation Uncertainty:Evidence from the G7 Economies
AbstractThe Friedman-Ball hypothesis implies a link between the inflation rate and inflation uncertainty. In this paper we employ a new test for the joint null hypothesis of no dependence effects and no asymmetry in the G7 inflation volatility. The results show that higher inflationrates operate additively via the conditional variance of inflation to induce greater inflation uncertainty in the U.S., U.K. and Canada. In addition, positive inflationary shocks are found to generate greater inflation uncertainty than negative shocks of a similar magnitude in the U.K. and Canada.
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Bibliographic InfoPaper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 959.
Length: 11 pages
Date of creation: 2006
Date of revision:
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Postal: Department of Economics, The University of Melbourne, 5th Floor, Economics and Commerce Building, Victoria, 3010, Australia
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More information through EDIRC
Friedman-Ball hypothesis; Asymmetry; Davies’ Problem;
Other versions of this item:
- Henry, Olan T. & Olekalns, Nilss & Suardi, Sandy, 2007. "Testing for rate dependence and asymmetry in inflation uncertainty: Evidence from the G7 economies," Economics Letters, Elsevier, vol. 94(3), pages 383-388, March.
- Sandy Suardi & O.T.Henry & N. Olekalns, . "Testing for Rate-Dependence and Asymmetry in Inflation Uncertainty: Evidence from the G7 Economies," MRG Discussion Paper Series 0306, School of Economics, University of Queensland, Australia.
- E39 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Other
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-03-18 (All new papers)
- NEP-CBA-2006-03-18 (Central Banking)
- NEP-MAC-2006-03-18 (Macroeconomics)
- NEP-MON-2006-03-18 (Monetary Economics)
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