IDEAS home Printed from https://ideas.repec.org/a/wsi/serxxx/v58y2013i04ns0217590813500306.html
   My bibliography  Save this article

Inflation, Inflation Uncertainty And Output Growth: Recent Evidence From Asean-5 Countries

Author

Listed:
  • SITI HAMIZAH MOHD

    (School of Economics, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, 43600 UKM Bangi, Selangor, Malaysia)

  • AHMAD ZUBAIDI BAHARUMSHAH

    (Department of Economics, Faculty of Economics and Management, Universiti Putra Malaysia, 43400 UPM Serdang, Selangor, Malaysia)

  • STILIANOS FOUNTAS

    (Department of Economics, University of Macedonia, 156 Egnatia Street, Thessaloniki, 540 06, Greece)

Abstract

This paper investigates the links between inflation, its uncertainty and economic growth in five ASEAN countries over the period 1980: Q1–2011: Q3. We rely on the Exponential GARCH (EGARCH) model to explore the causal relationship among the three variables. The major findings are: (i) inflation uncertainty increases more in response to positive inflation surprises than to negative surprises in all countries; (ii) inflationary shocks affect positively inflation uncertainty as predicted by the Friedman–Ball hypothesis; (iii) there is no evidence to suggest that inflation uncertainty causes inflation and; (iv) there is evidence that inflation affects growth negatively, both directly and indirectly (via the inflation uncertainty channel). The indirect effect is clearly stronger as it applies in all countries in the sample.

Suggested Citation

  • Siti Hamizah Mohd & Ahmad Zubaidi Baharumshah & Stilianos Fountas, 2013. "Inflation, Inflation Uncertainty And Output Growth: Recent Evidence From Asean-5 Countries," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 58(04), pages 1-17.
    • Handle: RePEc:wsi:serxxx:v:58:y:2013:i:04:n:s0217590813500306
    DOI: 10.1142/S0217590813500306
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S0217590813500306
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S0217590813500306?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-370, March.
    2. John Thornton, 2007. "The Relationship between Inflation and Inflation Uncertainty in Emerging Market Economies," Southern Economic Journal, John Wiley & Sons, vol. 73(4), pages 858-870, April.
    3. Atish Ghosh & Steven Phillips, 1998. "Warning: Inflation May Be Harmful to Your Growth," IMF Staff Papers, Palgrave Macmillan, vol. 45(4), pages 672-710, December.
    4. Catao, Luis A.V. & Terrones, Marco E., 2005. "Fiscal deficits and inflation," Journal of Monetary Economics, Elsevier, vol. 52(3), pages 529-554, April.
    5. Don Bredin & John Elder & Stilianos Fountas, 2009. "Macroeconomic Uncertainty and Performance in Asian Countries," Review of Development Economics, Wiley Blackwell, vol. 13(2), pages 215-229, May.
    6. Kevin B. Grier & Ólan T. Henry & Nilss Olekalns & Kalvinder Shields, 2004. "The asymmetric effects of uncertainty on inflation and output growth," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(5), pages 551-565.
    7. Siregar, Reza Yamora & Goo, Siwei, 2010. "Effectiveness and commitment to inflation targeting policy: Evidence from Indonesia and Thailand," Journal of Asian Economics, Elsevier, vol. 21(2), pages 113-128, April.
    8. Cukierman, Alex & Meltzer, Allan H, 1986. "A Theory of Ambiguity, Credibility, and Inflation under Discretion and Asymmetric Information," Econometrica, Econometric Society, vol. 54(5), pages 1099-1128, September.
    9. Hwang, Y., 2001. "Relationship between inflation rate and inflation uncertainty," Economics Letters, Elsevier, vol. 73(2), pages 179-186, November.
    10. Thornton, John, 2008. "Inflation and inflation uncertainty in Argentina, 1810-2005," Economics Letters, Elsevier, vol. 98(3), pages 247-252, March.
    11. Ball, Laurence, 1992. "Why does high inflation raise inflation uncertainty?," Journal of Monetary Economics, Elsevier, vol. 29(3), pages 371-388, June.
    12. S. Fountas & A. Ioannidis & M. Karanasos, 2004. "Inflation, Inflation Uncertainty and a Common European Monetary Policy," Manchester School, University of Manchester, vol. 72(2), pages 221-242, March.
    13. Kontonikas, A., 2004. "Inflation and inflation uncertainty in the United Kingdom, evidence from GARCH modelling," Economic Modelling, Elsevier, vol. 21(3), pages 525-543, May.
    14. Frederic S. Mishkin, 2004. "Can Inflation Targeting Work in Emerging Market Countries?," NBER Working Papers 10646, National Bureau of Economic Research, Inc.
    15. Pindyck, Robert S, 1991. "Irreversibility, Uncertainty, and Investment," Journal of Economic Literature, American Economic Association, vol. 29(3), pages 1110-1148, September.
    16. Fountas, Stilianos, 2001. "The relationship between inflation and inflation uncertainty in the UK: 1885-1998," Economics Letters, Elsevier, vol. 74(1), pages 77-83, December.
    17. Ross McLeod, 1999. "Crisis-Driven Changes to the Banking Laws and Regulations," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 35(2), pages 147-154.
    18. Laurence Ball & N. Gregory Mankiw & David Romer, 1988. "The New Keynsesian Economics and the Output-Inflation Trade-off," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 1-82.
    19. Apergis, Nicholas, 2004. "Inflation, output growth, volatility and causality: evidence from panel data and the G7 countries," Economics Letters, Elsevier, vol. 83(2), pages 185-191, May.
    20. Brunner, Allan D & Hess, Gregory D, 1993. "Are Higher Levels of Inflation Less Predictable? A State-Dependent Conditional Heteroscedasticity Approach," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(2), pages 187-197, April.
    21. Grier, Robin & Grier, Kevin B., 2006. "On the real effects of inflation and inflation uncertainty in Mexico," Journal of Development Economics, Elsevier, vol. 80(2), pages 478-500, August.
    22. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 225-250.
    23. Friedman, Milton, 1977. "Nobel Lecture: Inflation and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 451-472, June.
    24. Robert N McCauley, 2002. "Setting Monetary Policy in East Asia: Goals, Developments and Institutions," Occasional Papers, South East Asian Central Banks (SEACEN) Research and Training Centre, number occ33.
    25. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
    26. Davis, George K & Kanago, Bryce E, 2000. "The Level and Uncertainty of Inflation: Results from OECD Forecasts," Economic Inquiry, Western Economic Association International, vol. 38(1), pages 58-72, January.
    27. By Mohsin S. Khan & Abdelhak S. Senhadji, 2001. "Threshold Effects in the Relationship Between Inflation and Growth," IMF Staff Papers, Palgrave Macmillan, vol. 48(1), pages 1-1.
    28. Stockman, Alan C., 1981. "Anticipated inflation and the capital stock in a cash in-advance economy," Journal of Monetary Economics, Elsevier, vol. 8(3), pages 387-393.
    29. Grier, Kevin B. & Perry, Mark J., 1998. "On inflation and inflation uncertainty in the G7 countries," Journal of International Money and Finance, Elsevier, vol. 17(4), pages 671-689, August.
    30. Narayan, Paresh Kumar & Narayan, Seema & Smyth, Russell, 2009. "Understanding the inflation-output nexus for China," China Economic Review, Elsevier, vol. 20(1), pages 82-90, March.
    31. Ahmad Zubaidi Baharumshah & Nor Aishah Hamzah & Shamsul Rijal Muhammad Sabri, 2011. "Inflation uncertainty and economic growth: evidence from the LAD ARCH model," Journal of Applied Statistics, Taylor & Francis Journals, vol. 38(1), pages 195-206.
    32. Komain Jiranyakul & Timothy P. Opiela, 2011. "The Impact of Inflation Uncertainty on Output Growth and Inflation in Thailand," Asian Economic Journal, East Asian Economic Association, vol. 25(3), pages 291-307, September.
    33. Tony Cavoli & Ramkishen S. Rajan, 2007. "Managing in the Middle: Characterizing Singapore's Exchange Rate Policy," Asian Economic Journal, East Asian Economic Association, vol. 21(3), pages 321-342, September.
    34. Fountas, Stilianos, 2010. "Inflation, inflation uncertainty and growth: Are they related?," Economic Modelling, Elsevier, vol. 27(5), pages 896-899, September.
    35. Baillie, Richard T & Chung, Ching-Fan & Tieslau, Margie A, 1996. "Analysing Inflation by the Fractionally Integrated ARFIMA-GARCH Model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(1), pages 23-40, Jan.-Feb..
    36. Daal, Elton & Naka, Atsuyuki & Sanchez, Benito, 2005. "Re-examining inflation and inflation uncertainty in developed and emerging countries," Economics Letters, Elsevier, vol. 89(2), pages 180-186, November.
    37. Jonathan Temple, 2000. "Inflation and Growth: Stories Short and Tall," Journal of Economic Surveys, Wiley Blackwell, vol. 14(4), pages 395-426, September.
    38. Stilianos Fountas & Menelaos Karanasos & Jinki Kim, 2006. "Inflation Uncertainty, Output Growth Uncertainty and Macroeconomic Performance," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(3), pages 319-343, June.
    39. Jiranyakul, Komain & Opiela, Timothy P., 2010. "Inflation and inflation uncertainty in the ASEAN-5 economies," Journal of Asian Economics, Elsevier, vol. 21(2), pages 105-112, April.
    40. Pagan, Adrian, 1984. "Econometric Issues in the Analysis of Regressions with Generated Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 221-247, February.
    41. 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.
    42. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mendy, David & Widodo, Tri, 2018. "On the Inflation-Uncertainty Hypothesis in The Gambia: A Multi-Sample View on Causality Linkages," MPRA Paper 86743, University Library of Munich, Germany.
    2. Claudiu T. Albulescu & Aviral Kumar Twari & Stephen M. Miller & Rangan Gupta, 2015. "Time-Frequency Relationship between Inflation and Inflation Uncertainty for the U.S.: Evidence from Historical Data," Working Papers 201591, University of Pretoria, Department of Economics.
    3. Apostolos Serletis & Jinan Liu, 2022. "Inflation and economic activity in advanced and emerging economies," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(4), pages 4196-4223, October.
    4. Baharumshah, Ahmad Zubaidi & Slesman, Ly & Wohar, Mark E., 2016. "Inflation, inflation uncertainty, and economic growth in emerging and developing countries: Panel data evidence," Economic Systems, Elsevier, vol. 40(4), pages 638-657.
    5. Bernard Njindan Iyke & Sin-Yu Ho, 2019. "Inflation, Inflation Uncertainty, and Growth: Evidence from Ghana," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 13(2), June.
    6. Haryo Kuncoro, 2024. "Inflation and Its Uncertainty: Evidence from Indonesia and the Philippines," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 16(2), pages 231-247, May.
    7. Raghavan, Mala & Athanasopoulos, George, 2019. "Analysis of shock transmissions to a small open emerging economy using a SVARMA model," Economic Modelling, Elsevier, vol. 77(C), pages 187-203.
    8. Said Zamin Shah & Said Zamin Shah & Ahmad Zubaidi Baharumshah & Muzafar Shah Habibullah & Law Siong Hook, 2017. "The Asymmetric Effects of Real and Nominal Uncertainty on Inflation and Output Growth: Empirical Evidence from Bangladesh," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 377-386.
    9. Claudiu Tiberiu Albulescu & Aviral Kumar Tiwari & Stephen M. Miller & Rangan Gupta, 2019. "Time–frequency relationship between US inflation and inflation uncertainty: evidence from historical data," Scottish Journal of Political Economy, Scottish Economic Society, vol. 66(5), pages 673-702, November.
    10. Jiranyakul, Komain, 2020. "The Linkages between Inflation and Inflation Uncertainty in Selected Asian Economies: Evidence from Quantile Regression," MPRA Paper 99868, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nora Abu Asab & Juan Carlos Cuestas & Alberto Montagnoli, 2018. "Inflation targeting or exchange rate targeting: Which framework supports the goal of price stability in emerging market economies?," PLOS ONE, Public Library of Science, vol. 13(8), pages 1-21, August.
    2. Ahmad Zubaidi Baharumshah & Akram Hasanov & Stilianos Fountas, 2011. "Inflation and inflation uncertainty: Evidence from two Transition Economies," Discussion Paper Series 2011_05, Department of Economics, University of Macedonia, revised Apr 2011.
    3. Hassan Heidari & Salih Turan Katircioglu & Sahar Bashiri, 2013. "Inflation, inflation uncertainty and growth in the Iranian economy: an application of BGARCH-M model with BEKK approach," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 14(5), pages 819-832, November.
    4. Ahmad Zubaidi Baharumshah & Siew-Voon Soon, 2014. "Inflation, inflation uncertainty and output growth: what does the data say for Malaysia?," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 41(3), pages 370-386, May.
    5. Buth, Bora & Kakinaka, Makoto & Miyamoto, Hiroaki, 2015. "Inflation and inflation uncertainty: The case of Cambodia, Lao PDR, and Vietnam," Journal of Asian Economics, Elsevier, vol. 38(C), pages 31-43.
    6. Shah, Said Zamin & Baharumshah, Ahmad Zubaidi & Hook, Law Siong & Habibullah, Muzafar Shah, 2017. "Nominal uncertainty, real uncertainty and macroeconomic performance in a time-varying asymmetric framework: Implications for monetary policy," Research in International Business and Finance, Elsevier, vol. 42(C), pages 75-93.
    7. Said Zamin Shah & Said Zamin Shah & Ahmad Zubaidi Baharumshah & Muzafar Shah Habibullah & Law Siong Hook, 2017. "The Asymmetric Effects of Real and Nominal Uncertainty on Inflation and Output Growth: Empirical Evidence from Bangladesh," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 377-386.
    8. Kushal Banik Chowdhury & Kaustav Kanti Sarkar & Srikanta Kundu, 2021. "Nonlinear relationships between inflation, output growth and uncertainty in India: New evidence from a bivariate threshold model," Bulletin of Economic Research, Wiley Blackwell, vol. 73(3), pages 469-493, July.
    9. Said Zamin Shah & Ahmad Zubaidi Baharumshah & Muzafar Shah Habibullah, 2019. "Dynamic Linkages and Volatility Transmissions between Macroeconomic Uncertainty and Performance: Evidence from South Asian Countries," Journal of South Asian Development, , vol. 14(3), pages 281-313, December.
    10. Carmen PINTILESCU & Mircea ASANDULUI & Elena-Daniela VIORICA & Danut-Vasile JEMNA, 2016. "Investigation On The Causal Relationship Between Inflation, Output Growth And Their Uncertainties In Romania," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 17, pages 71-89, June.
    11. Chang, Kuang-Liang, 2012. "The impacts of regime-switching structures and fat-tailed characteristics on the relationship between inflation and inflation uncertainty," Journal of Macroeconomics, Elsevier, vol. 34(2), pages 523-536.
    12. Georgios Bampinas & Panagiotis Konstantinou & Theodore Panagiotidis, 2021. "Reassessing the inflation uncertainty‐inflation relationship in the tails," Bulletin of Economic Research, Wiley Blackwell, vol. 73(4), pages 508-534, October.
    13. Zeynel Abidin Ozdemir, 2010. "Dynamics Of Inflation, Output Growth And Their Uncertainty In The Uk: An Empirical Analysis," Manchester School, University of Manchester, vol. 78(6), pages 511-537, December.
    14. Kuang‐Liang Chang & Chi‐Wei He, 2010. "Does The Magnitude Of The Effect Of Inflation Uncertainty On Output Growth Depend On The Level Of Inflation?," Manchester School, University of Manchester, vol. 78(2), pages 126-148, March.
    15. Mehmet Balcilar & Zeynel Abidin Ozdemir, 2013. "Asymmetric and Time-Varying Causality between Inflation and Inflation Uncertainty in G-7 Countries," Scottish Journal of Political Economy, Scottish Economic Society, vol. 60(1), pages 1-42, February.
    16. Kushal Banik Chowdhury & Srikanta Kundu & Nityananda Sarkar, 2018. "Regime‐dependent effects of uncertainty on inflation and output growth: evidence from the United Kingdom and the United States," Scottish Journal of Political Economy, Scottish Economic Society, vol. 65(4), pages 390-413, September.
    17. James Payne, 2009. "Inflation targeting and the inflation-inflation uncertainty relationship: evidence from Thailand," Applied Economics Letters, Taylor & Francis Journals, vol. 16(3), pages 233-238.
    18. James Payne, 2009. "Official dollarization in El Salvador and the inflation-inflation uncertainty nexus," Applied Economics Letters, Taylor & Francis Journals, vol. 16(12), pages 1195-1199.
    19. Guglielmo Caporale & Luca Onorante & Paolo Paesani, 2012. "Inflation and inflation uncertainty in the euro area," Empirical Economics, Springer, vol. 43(2), pages 597-615, October.
    20. Stéphane Goutte & David Guerreiro & Bilel Sanhaji & Sophie Saglio & Julien Chevallier, 2019. "International Financial Markets," Post-Print halshs-02183053, HAL.

    More about this item

    Keywords

    Inflation; inflation uncertainty; output growth; ASEAN; C22; E31; E52;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:serxxx:v:58:y:2013:i:04:n:s0217590813500306. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/ser/ser.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.