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The asymmetric effects of uncertainty on inflation and output growth

Author Info

  • Kevin B. Grier

    (Department of Economics, University of Oklahoma, USA)

  • Ólan 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)

Abstract

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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File URL: http://hdl.handle.net/10.1002/jae.763
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File URL: http://qed.econ.queensu.ca:80/jae/2004-v19.5/
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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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  • E39 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Other

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  1. Robert J. Barro, 1995. "Inflation and Economic Growth," NBER Working Papers 5326, National Bureau of Economic Research, Inc.
  2. Pesaran, M.H. & Shin, Y., 1993. "Cointegration and Speed of Convergence to Equilibrium," Cambridge Working Papers in Economics 9311, Faculty of Economics, University of Cambridge.
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  8. Denis Kwiatkowski & Peter C.B. Phillips & Peter Schmidt, 1991. "Testing the Null Hypothesis of Stationarity Against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root?," Cowles Foundation Discussion Papers 979, Cowles Foundation for Research in Economics, Yale University.
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  13. repec:cup:etheor:v:11:y:1995:i:1:p:122-50 is not listed on IDEAS
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  17. Dawson, John W. & Stephenson, E. Frank, 1997. "The link between volatility and growth: Evidence from the States," Economics Letters, Elsevier, vol. 55(3), pages 365-369, September.
  18. Chris Brooks & Olan T. Henry & Gita Persand, 2002. "The Effect of Asymmetries on Optimal Hedge Ratios," The Journal of Business, University of Chicago Press, vol. 75(2), pages 333-352, April.
  19. Ólan T. Henry & Nilss Olekalns, 2002. "The Effect of Recessions on the Relationship between Output Variability and Growth," Southern Economic Journal, Southern Economic Association, vol. 68(3), pages 683-692, January.
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