The relationship between inflation, output growth, and their uncertainties: Evidence from selected CEE countries
AbstractIn this paper, we examine causal relationships among inflation rate, output growth rate, inflation uncertainty and output uncertainty for ten Central and Eastern European transition countries. For this purpose, we estimate a bivariate GARCH model that includes output growth and inflation rates for each country. Then we use conditional standard deviations of inflation and output to proxy nominal and real uncertainty, respectively, and perform Granger-causality tests. Our results suggest that inflation rate induces uncertainty about both inflation rate and output growth rate, which is detrimental for real economic activity. On the other hand, we find that output growth rate reduces macroeconomic uncertainty in some countries. In addition, we also examine and discuss causal relationships among remaining variables.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 23764.
Date of creation: 09 Jul 2010
Date of revision:
Inflation; output growth; uncertainty; Granger-Causality tests; transition countries;
Other versions of this item:
- MÃƒÆ’Ã‚Â¼bariz Hasanov & Tolga Omay, 2011. "The Relationship Between Inflation, Output Growth, and Their Uncertainties: Evidence from Selected CEE Countries," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., M.E. Sharpe, Inc., vol. 47(0), pages 5-20, July.
- Mubariz Hasanov & Tolga Omay, 2012. "The Relationship between Inflation, output growth, and their Uncertainties: Evidence from selected CEE countries," Hacettepe University Department of Economics Working Papers, Hacettepe University, Department of Economics 20128, Hacettepe University, Department of Economics.
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
- E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-12-04 (All new papers)
- NEP-FDG-2010-12-04 (Financial Development & Growth)
- NEP-MAC-2010-12-04 (Macroeconomics)
- NEP-TRA-2010-12-04 (Transition Economics)
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