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Inflation Uncertainty and Output

In: Monetary Policy and the Economy in South Africa

Author

Listed:
  • Mthuli Ncube

    (African Development Bank Group)

  • Eliphas Ndou

    (Reserve Bank of South Africa)

Abstract

This chapter introduces the relationship between output and inflation, including the role of inflation uncertainty. Friedman (1977) argued that increased inflation uncertainty reduces the information function of price movements and hinders long-term contracting, thus potentially reducing real output growth, and high inflation leads to higher inflation uncertainty. The chapter uses a generalized autoregressive conditional heteroscedasticity-in-mean (GARCH-M) framework to investigate why price stability as a mandate for monetary policy authorities is significant.

Suggested Citation

  • Mthuli Ncube & Eliphas Ndou, 2013. "Inflation Uncertainty and Output," Palgrave Macmillan Books, in: Monetary Policy and the Economy in South Africa, chapter 3, pages 25-39, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-137-33415-2_3
    DOI: 10.1057/9781137334152_3
    as

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