The effects of inflation uncertainty: some international evidence
Purpose - The purpose of this paper is to examine the effects of inflation uncertainty on real economic activity using data from four industrialised countries. Design/methodology/approach - The paper uses the econometric framework developed by Elder in the context of a multivariate framework in which a structural vector autoregression (VAR) is modified to accommodate multivariate GARCH-in-mean (MGARCH-M) errors. It calculates the impulse response functions for the multivariate GARCH(1,1)-in-mean VAR in order to see whether the specification captures the fundamental dynamics. Findings - The results show that inflation uncertainty has differential effects on output growth across these countries. Originality/value - In the context of multivariate GARCH(1,1)-in-mean VAR, this paper uses a non-recursive identification scheme and separate identification for the large and small economies.
Volume (Year): 36 (2009)
Issue (Month): 5 (September)
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