Indexation and the Effect of Inflation Uncertainty on Real GNP
This article examines the combined effects of inflation uncertainty and indexation on the growth rate of real gross national product (GN P). The evidence suggests that greater indexation partially reduces t he adverse effect of inflation uncertainty on real GNP growth over time. It also indicates that, in contrast to earlier findings regarding th e effect of inflation uncertainty on employment, the overall effect of inflation uncertainty on real GNP growth may be permanent. A preliminary assessment of whether the discrepancy is the result of in flation uncertainty permanently affecting the growth rate of the capi tal stock is inconclusive. Copyright 1988 by the University of Chicago.