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Inflation uncertainty

Author

Listed:
  • Apostolos Serletis

    (University of Calgary)

  • Libo Xu

    (Lakehead University)

Abstract

We use a Markov regime switching structural GARCH-in-Mean VAR model for the inflation rate, the output gap, and a short-term nominal interest rate, to investigate the relationship between inflation uncertainty and economic activity in the USA. We find that inflation uncertainty has a negative and statistically significant effect on the output gap. Also, inflation shocks have a negative effect on the output gap, irrespective of whether they are positive or negative, with the asymmetry being caused by the negative effects of inflation uncertainty.

Suggested Citation

  • Apostolos Serletis & Libo Xu, 2024. "Inflation uncertainty," Empirical Economics, Springer, vol. 66(5), pages 1903-1920, May.
    • Handle: RePEc:spr:empeco:v:66:y:2024:i:5:d:10.1007_s00181-023-02512-9
    DOI: 10.1007/s00181-023-02512-9
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    References listed on IDEAS

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    More about this item

    Keywords

    Markov regime-switching; New Keynesian model; Multivariate GARCH;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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