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The asymmetric effects of uncertainty on inflation and output growth

  • Kevin B. Grier

    (Department of Economics, University of Oklahoma, USA)

  • �lan T. Henry

    (Department of Economics, University of Melbourne, Australia)

  • Nilss Olekalns

    (Department of Economics, University of Melbourne, Australia)

  • Kalvinder Shields

    (Department of Economics, University of Melbourne, Australia)

We study the effects of growth volatility and inflation volatility on average rates of output growth and inflation for post-war US data. Our results suggest that increased growth uncertainty is associated with significantly lower average growth, while higher inflation uncertainty is significantly negatively correlated with lower output growth and lower average inflation. Both inflation and growth display evidence of significant asymmetric response to positive and negative shocks of equal magnitude. Copyright © 2004 John Wiley & Sons, Ltd.

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Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 19 (2004)
Issue (Month): 5 ()
Pages: 551-565

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Handle: RePEc:jae:japmet:v:19:y:2004:i:5:p:551-565
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