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Effect of inflation uncertainty, output uncertainty and oil price on inflation and growth in Australia

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  • Girijasankar Mallik
  • Anis Chowdhury

Abstract

Purpose - The purpose of this paper is to determine the relationship between inflation, inflation uncertainty, growth and growth uncertainty for Australia. Design/methodology/approach - Multivariate EGARCH models has been used to estimate the relationship between inflation, inflation uncertainty, growth and growth uncertainty for Australia. Findings - Using quarterly data in multivariate EGARCH models, this study finds that both inflation uncertainty and output uncertainty have negative and significant effects on output growth. The paper also finds that, while inflation uncertainty has a positive and significant effect on inflation, output uncertainty has a negative and significant effect on inflation. The study uses a newly constructed oil price dummy as a control variable and finds that oil price changes significantly increase inflation uncertainty. The study also finds that inflation uncertainty and the inflation level have both declined since the adoption of a formal inflation-targeting monetary policy in Australia. Research limitations/implications - Multivariate EGARCH model can be used to estimate the effects of inflation, inflation uncertainty, growth and growth uncertainty for cross-country analysis. Originality/value - This is the first study of the effect of inflation uncertainty and growth uncertainty on inflation and growth in Australia using a newly constructed oil price dummy in a multivariate EGARCH framework.

Suggested Citation

  • Girijasankar Mallik & Anis Chowdhury, 2011. "Effect of inflation uncertainty, output uncertainty and oil price on inflation and growth in Australia," Journal of Economic Studies, Emerald Group Publishing, vol. 38(4), pages 414-429, September.
  • Handle: RePEc:eme:jespps:v:38:y:2011:i:4:p:414-429
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    Cited by:

    1. Mustafa Caglayan & Ozge Kandemir & Kostas Mouratidis, 2012. "The Impact of Inflation Uncertainty on Economic Growth: A MRS-IV Approach," Working Papers 2012025, The University of Sheffield, Department of Economics.
    2. Nagmi M. Moftah Aimer, 2016. "The Effects of Oil Price Volatility on the Economic Sectors of Libya," International Journal of Business and Social Research, MIR Center for Socio-Economic Research, vol. 6(12), pages 13-24, December.
    3. Mustafa Caglayan & Ozge Kandemir & Kostas Mouratidis, 2011. "Real effects of inflation uncertainty in the US," Working Papers 2011002, The University of Sheffield, Department of Economics, revised Feb 2015.
    4. Mohd Shahidan Shaari & Tan Lee Pei & Hafizah Abdul Rahim, 2013. "Effects of Oil Price Shocks on the Economic Sectors in Malaysia," International Journal of Energy Economics and Policy, Econjournals, pages 360-366.
    5. 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.

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