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 inflation rates 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 School of Economics, University of Queensland, Australia in its series MRG Discussion Paper Series with number 0306.
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- 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.
- Olan T. Henry & Nilss Olekalns & Sandy Suardi, 2006. "Testing for Rate-Dependence and Asymmetry in Inflation Uncertainty:Evidence from the G7 Economies," Department of Economics - Working Papers Series 959, The University of Melbourne.
- E39 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Other
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-03-11 (All new papers)
- NEP-CBA-2006-03-11 (Central Banking)
- NEP-MAC-2006-03-11 (Macroeconomics)
- NEP-MON-2006-03-11 (Monetary Economics)
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