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The Euro and Inflation Uncertainty in the European Monetary Union

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  • Guglielmo Maria, Caporale

    ()
    (CELPE (Centre of Labour Economics and Economic Policy), University of Salerno, Italy)

  • Alexandros , Kontonikas

    ()
    (CELPE (Centre of Labour Economics and Economic Policy), University of Salerno, Italy)

Abstract

This paper investigates the relationship between inflation and inflation uncertainty in twelve EMU countries. A time-varying GARCH model is estimated to distinguish between short-run and steady-state inflation uncertainty. The effects of the introduction of the Euro in 1999 are then examined introducing a dummy variable. Overall, it appears that post-1999 steady-state inflation has generally remained stable, steady-state inflation uncertainty and inflation persistence have both increased, and the relationship between inflation and inflation uncertainty has broken down in many countries. When the break dates are determined endogenously, the adjustment is found to have taken place before the introduction of the Euro

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Bibliographic Info

Paper provided by CELPE - Centre of Labour Economics and Economic Policy, University of Salerno, Italy in its series CELPE Discussion Papers with number 101.

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Length: 39 pages
Date of creation: 30 Jul 2007
Date of revision:
Handle: RePEc:sal:celpdp:0101

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Keywords: Inflation; Inflation Uncertainty; Inflation Persistence; Time-Varying Parameters; GARCH models; ECB; EMU;

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Citations

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Cited by:
  1. Khan, Muhammad & Kebewar, mazen & Nenovsky, Nikolay, 2013. "Inflation Uncertainty, Output Growth Uncertainty and Macroeconomic Performance: Comparing Alternative Exchange Rate Regimes in Eastern Europe," MPRA Paper 45523, University Library of Munich, Germany.
  2. Neanidis, Kyriakos C. & Savva, Christos S., 2011. "Nominal uncertainty and inflation: The role of European Union membership," Economics Letters, Elsevier, Elsevier, vol. 112(1), pages 26-30, July.
  3. Don Bredin & Stilianos Fountas, 2011. "US Infl ation and infl ation uncertainty in a historical perspective: The impact of recessions," Working Papers, Geary Institute, University College Dublin 201053, Geary Institute, University College Dublin.
  4. Pierre-Richard Agenor & Joshua Aizenman, 2008. "Capital Market Imperfections and the Theory of Optimum Currency Areas," NBER Working Papers 14088, National Bureau of Economic Research, Inc.
  5. Caporale, Guglielmo Maria & Paesani, Paolo & Onorante, Luca, 2010. "Inflation and inflation uncertainty in the euro area," Working Paper Series, European Central Bank 1229, European Central Bank.
  6. Hartmann, Matthias & Roestel, Jan, 2013. "Inflation, output and uncertainty in the era of inflation targeting – A multi-economy view on causal linkages," Journal of International Money and Finance, Elsevier, Elsevier, vol. 37(C), pages 98-112.
  7. Thomas Windberger & Achim Zeileis, 2011. "Structural Breaks in Inflation Dynamics within the European Monetary Union," Working Papers, Faculty of Economics and Statistics, University of Innsbruck 2011-12, Faculty of Economics and Statistics, University of Innsbruck.
  8. Vito Polito & Peter Spencer, . "UK Macroeconomic Volatility and the Welfare Costs of Inflation," Discussion Papers, Department of Economics, University of York 11/21, Department of Economics, University of York.
  9. Christian Grimme & Steffen Henzel & Elisabeth Wieland, 2011. "Inflation uncertainty revisited: A proposal for robust measurement," Ifo Working Paper Series Ifo Working Paper No. 111, Ifo Institute for Economic Research at the University of Munich.
  10. Steffen Ahrens & Matthias Hartmann, 2014. "State-dependence vs. Time-dependence: An Empirical Multi-Country Investigation of Price Sluggishness," Kiel Working Papers 1907, Kiel Institute for the World Economy.
  11. Sauter, Oliver, 2012. "Assessing uncertainty in Europe and the US: is there a common uncertainty factor?," MPRA Paper 38031, University Library of Munich, Germany.

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