Advanced Search
MyIDEAS: Login to save this paper or follow this series

Empirical analysis on the real effects of inflation and exchange rate uncertainty: The case of Colombia

Contents:

Author Info

  • Isabel Ruiz

    (Western Michigan University)

Abstract

This paper re-examines the effects of inflation and exchange rate uncertainty on real economic activity. The existent literature has treated both issues as separate subject matters. It has emphasized either the issue of inflation uncertainty or exchange rate uncertainty on economic growth or on different measures of economic activity. This paper attempts dealing with both issues by analyzing the magnitudes and direction of the effect of both: inflation and exchange rate uncertainty on real economic activity. By introducing dummy variables, we control for monetary policy change (the change to inflation targeting and flexible exchange rate). By using a generalized autoregressive conditional variance (GARCH) model of inflation and exchange rates, the conditional variances of the model’s forecast errors were extracted as measures of uncertainty. The results suggest that higher levels of inflation Granger cause more uncertainty and vice versa for the Colombian economy. Also, only inflation uncertainty matters for output by exerting a negative influence.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://128.118.178.162/eps/if/papers/0511/0511006.pdf
Download Restriction: no

Bibliographic Info

Paper provided by EconWPA in its series International Finance with number 0511006.

as in new window
Length: 22 pages
Date of creation: 27 Nov 2005
Date of revision:
Handle: RePEc:wpa:wuwpif:0511006

Note: Type of Document - pdf; pages: 22. Publiseh in 'Ecos de Economia' at
Contact details of provider:
Web page: http://128.118.178.162

Related research

Keywords: Inflation Targeting; Inflation Uncertainty; Exchange Rate; Uncertainty; GARCH models; Granger causality;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Crawford, A & Kasumovich, M, 1996. "Does Inflation Uncertainty Vary with the Level of Inflation?," Working Papers 96-09, Bank of Canada.
  2. Henry Ma, 1998. "Inflation, Uncertainty, and Growth in Colombia," IMF Working Papers 98/161, International Monetary Fund.
  3. Friedman, Milton, 1977. "Nobel Lecture: Inflation and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 451-72, June.
  4. Igal Magendzo, 1997. "Inflación e Incertidumbre Inflacionaria en Chile," Working Papers Central Bank of Chile 15, Central Bank of Chile.
  5. Grier, Kevin B. & Perry, Mark J., 1998. "On inflation and inflation uncertainty in the G7 countries," Journal of International Money and Finance, Elsevier, vol. 17(4), pages 671-689, August.
  6. Laurence Ball, 1990. "Why Does High Inflation Raise Inflation Uncertainty?," NBER Working Papers 3224, National Bureau of Economic Research, Inc.
  7. Vittorio Corbo & Klaus Schmidt-Hebbel, 2002. "Inflation Targeting in Latin America," Documentos de Trabajo 230, Instituto de Economia. Pontificia Universidad Católica de Chile..
  8. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  9. Chris Ryan & Christopher Thompson, 2000. "Inflation Targeting and Exchange Rate Fluctuations in Australia," RBA Research Discussion Papers rdp2000-06, Reserve Bank of Australia.
  10. Bera, Anil K & Higgins, Matthew L, 1993. " ARCH Models: Properties, Estimation and Testing," Journal of Economic Surveys, Wiley Blackwell, vol. 7(4), pages 305-66, December.
  11. Kevin B. Grier & Mark J. Perry, 2000. "The effects of real and nominal uncertainty on inflation and output growth: some garch-m evidence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(1), pages 45-58.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Amber Fatima & Abdul Waheed, 2014. "Economic uncertainty and growth performance: a macroeconomic modeling analysis for Pakistan," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(3), pages 1361-1387, May.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpif:0511006. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.