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Low Inflation vs. Stable Inflation: Evidence from the UK, 1688–2009

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  • Georgios Karras

Abstract

type="main" xml:id="sjpe12090-abs-0001"> This paper investigates the relationship between inflation and inflation volatility. Using annual data from 1688 to 2009, the results show that UK inflation and its volatility have been positively correlated when inflation exceeds a certain value, but negatively correlated when inflation is below this threshold. The evidence also suggests that the break in the relationship occurs between annual inflation rates of 0.6% and 5.5%, which includes both the 2% inflation target of many central banks, and the 3.5% break point predicted by the New Keynesian model of Coibion et al. (2012).

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  • Georgios Karras, 2015. "Low Inflation vs. Stable Inflation: Evidence from the UK, 1688–2009," Scottish Journal of Political Economy, Scottish Economic Society, vol. 62(5), pages 505-517, November.
    • Handle: RePEc:bla:scotjp:v:62:y:2015:i:5:p:505-517
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    References listed on IDEAS

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    2. Georgios Bampinas & Panagiotis Konstantinou & Theodore Panagiotidis, 2021. "Reassessing the inflation uncertainty‐inflation relationship in the tails," Bulletin of Economic Research, Wiley Blackwell, vol. 73(4), pages 508-534, October.

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