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The time-varying correlation between uncertainty, output, and inflation: Evidence from a DCC-GARCH model

  • Jones, Paul M.
  • Olson, Eric

Using a new uncertainty index from Baker et al. (2012), we evaluate the time-varying correlation between macroeconomic uncertainty, inflation, and output. Estimation results from a multivariate DCC-GARCH model reveal that the sign of the correlation between macroeconomic uncertainty and inflation changed from negative to positive during the late 1990s, whereas the correlation between uncertainty and output is consistently negative.

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File URL: http://www.sciencedirect.com/science/article/pii/S0165176512005198
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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 118 (2013)
Issue (Month): 1 ()
Pages: 33-37

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Handle: RePEc:eee:ecolet:v:118:y:2013:i:1:p:33-37
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. Eric Zivot & Donald W.K. Andrews, 1990. "Further Evidence on the Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Cowles Foundation Discussion Papers 944, Cowles Foundation for Research in Economics, Yale University.
  2. Nicholas Bloom, 2009. "The Impact of Uncertainty Shocks," Econometrica, Econometric Society, vol. 77(3), pages 623-685, 05.
  3. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
  4. R?diger Bachmann & Steffen Elstner & Eric R. Sims, 2013. "Uncertainty and Economic Activity: Evidence from Business Survey Data," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(2), pages 217-49, April.
  5. James D. Hamilton, 2008. "Macroeconomics and ARCH," NBER Working Papers 14151, National Bureau of Economic Research, Inc.
  6. Engle, Robert, 2002. "Dynamic Conditional Correlation: A Simple Class of Multivariate Generalized Autoregressive Conditional Heteroskedasticity Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(3), pages 339-50, July.
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