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Real effects of inflation uncertainty in the US

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Author Info

  • Mustafa Caglayan

    ()

  • Ozge Kandemir
  • Kostas Mouratidis

    ()
    (Department of Economics, The University of Sheffield)

Abstract

We empirically investigate the effects of inflation uncertainty on output growth for the US using both monthly and quarterly data over 1985-2009. Employing a Markov regime switching approach to model output dynamics, we show that inflation uncertainty obtained from a Markov regime switching GARCH model exerts a negative and regime dependant impact on output growth. In particular, we show that the negative impact of inflation uncertainty on output growth is almost 4.5 times higher during the low growth regime than that during the high growth regime. We verify the robustness of our findings using quarterly data

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File URL: http://www.shef.ac.uk/economics/research/serps/articles/2011_002.html
File Function: First version, 2011
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Bibliographic Info

Paper provided by The University of Sheffield, Department of Economics in its series Working Papers with number 2011002.

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Length: 36 pages
Date of creation: Feb 2011
Date of revision: Feb 2011
Handle: RePEc:shf:wpaper:2011002

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Related research

Keywords: Growth; inflation uncertainty; Markov-switching modeling; Markov-switching GARCH;

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