Asymmetric effects of inflation shocks on inflation uncertainty
The empirically documented regularity that dis-inflationary shocks are associated with larger output changes than are positive shocks presents an interesting puzzle to macroeconomists. This paper presents, and empirically supports, a new explanation for this asymmetry. The authors show, using a TARCH model, that negative inflationary shocks result in greater inflation uncertainty than positive shocks. As Friedman  argues, and a body of empirical evidence demonstrates, inflation uncertainty leads to lower output growth. Drawing on this explanation, this essay points to an avenue by which the output asymmetry of inflationary shocks can be explained. Copyright International Atlantic Economic Society 2002
Volume (Year): 30 (2002)
Issue (Month): 4 (December)
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- James Peery Cover, 1992. "Asymmetric Effects of Positive and Negative Money-Supply Shocks," The Quarterly Journal of Economics, Oxford University Press, vol. 107(4), pages 1261-1282.
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- Kevin B. Grier & Mark J. Perry, 2000. "The effects of real and nominal uncertainty on inflation and output growth: some garch-m evidence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(1), pages 45-58. Full references (including those not matched with items on IDEAS)
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