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Dynamics Of Inflation, Output Growth And Their Uncertainty In The Uk: An Empirical Analysis

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  • ZEYNEL ABIDIN OZDEMIR

Abstract

The aim of this paper is to analyse the dynamics relationships between inflation, output growth, and real and nominal uncertainty using the VARFIMA‐BEKK MGARCH model of inflation and output growth and quarterly data for the UK covering the 1957:Q2–2006:Q4 period. The analysis is also done for the three sub‐periods determined by considering the structural changes such as the Great Moderation in the series of the UK. Two findings are obtained. First, the evidence obtained from the full period supports a number of important conclusions, one of which is mixed evidence regarding the effect of inflation on inflation uncertainty, another one being strong evidence regarding the positive effect of inflation uncertainty on inflation and output growth. Taking this into account, it is possible to put forward that an essential determinant of economic growth is uncertainty about the inflation rate. The last finding for this period is that output growth uncertainty is a positive determinant of the inflation and output growth rate. Second, the evidence found from the sub‐periods is that there are no linkages between inflation, output growth and their volatility.

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  • Zeynel Abidin Ozdemir, 2010. "Dynamics Of Inflation, Output Growth And Their Uncertainty In The Uk: An Empirical Analysis," Manchester School, University of Manchester, vol. 78(6), pages 511-537, December.
  • Handle: RePEc:bla:manchs:v:78:y:2010:i:6:p:511-537
    DOI: 10.1111/j.1467-9957.2009.02153.x
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    2. Chiou-Wei, Song-Zan & Zhu, Zhen & Chen, Sheng-Hung & Hsueh, Sheng-Pin, 2016. "Controlling for relevant variables: Energy consumption and economic growth nexus revisited in an EGARCH-M (Exponential GARCH-in-Mean) model," Energy, Elsevier, vol. 109(C), pages 391-399.
    3. Talknice Saungweme & Nicholas M. Odhiambo, "undated". "Inflation And Economic Growth In Kenya: An Empirical Examination," Working Papers AESRI04, African Economic and Social Research Institute (AESRI).
    4. Mehmet Balcilar & Zeynel Abidin Ozdemir, 2020. "A re-examination of growth and growth uncertainty relationship in a stochastic volatility in the mean model with time-varying parameters," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 47(3), pages 611-641, August.
    5. Nasr, Adnen Ben & Balcilar, Mehmet & Ajmi, Ahdi N. & Aye, Goodness C. & Gupta, Rangan & van Eyden, Reneé, 2015. "Causality between inflation and inflation uncertainty in South Africa: Evidence from a Markov-switching vector autoregressive model," Emerging Markets Review, Elsevier, vol. 24(C), pages 46-68.
    6. Talknice Saungweme & Nicholas M. Odhiambo, 2021. "Inflation and Economic Growth in Kenya: An Empirical Examination," Advances in Decision Sciences, Asia University, Taiwan, vol. 25(3), pages 1-25, September.
    7. Ahmad Zubaidi Baharumshah & Siew-Voon Soon, 2014. "Inflation, inflation uncertainty and output growth: what does the data say for Malaysia?," Journal of Economic Studies, Emerald Group Publishing, vol. 41(3), pages 370-386, May.
    8. Talknice Saungweme & Nicholas M. Odhiambo, 2021. "Inflation and Economic Growth in Kenya: An Empirical Examination," Advances in Decision Sciences, Asia University, Taiwan, vol. 25(3), pages 1-25, September.

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