IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

The Relationship between Inflation, output growth, and their Uncertainties: Evidence from selected CEE countries

Listed author(s):
  • Mubariz Hasanov

    (Hacettepe University, Department of Economics)

  • Tolga Omay

    (Cankaya University, Department of International Trade Management)

In this paper, we examine causal relationships among inflation rate, output growth rate, inflation uncertainty and output uncertainty for ten Central and Eastern European transition countries. For this purpose, we estimate a bivariate GARCH model that includes output growth and inflation rates for each country. Then we use conditional standard deviations of inflation and output to proxy nominal and real uncertainty, respectively, and perform Granger-causality tests. Our results suggest that inflation rate induces uncertainty about both inflation rate and output growth rate, which is detrimental for real economic activity. On the other hand, we find that output growth rate reduces macroeconomic uncertainty. In addition, we also examine and discuss causal relationships among remaining variables.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.iktisat.hacettepe.edu.tr/WP/WP-2012-8.pdf
Download Restriction: no

Paper provided by Hacettepe University, Department of Economics in its series Hacettepe University Department of Economics Working Papers with number 20128.

as
in new window

Length: 37 pages
Date of creation: 2012
Handle: RePEc:hac:hacwop:20128
Contact details of provider: Postal:
Hacettepe University, Faculty of Economics and Administrative Sciences, Department of Economics, Ankara, Turkey

Phone: 0090 312 297 8652
Fax: (312) 299 2003
Web page: http://www.iktisat.hacettepe.edu.tr
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Dotsey, Michael & Sarte, Pierre Daniel, 2000. "Inflation uncertainty and growth in a cash-in-advance economy," Journal of Monetary Economics, Elsevier, vol. 45(3), pages 631-655, June.
  2. Stanley Fischer & Ratna Sahay, 2000. "The Transition Economies After Ten Years," IMF Working Papers 00/30, International Monetary Fund.
  3. Devereux, Michael, 1989. "A Positive Theory of Inflation and Inflation Variance," Economic Inquiry, Western Economic Association International, vol. 27(1), pages 105-116, January.
  4. Keith Blackburn & Alessandra Pelloni, 2005. "Growth, cycles, and stabilization policy," Oxford Economic Papers, Oxford University Press, vol. 57(2), pages 262-282, April.
  5. Gérard Roland, 2004. "Transition and Economics: Politics, Markets, and Firms," MIT Press Books, The MIT Press, edition 1, volume 1, number 026268148x, January.
  6. Max Gillman & Mark N. Harris, 2010. "The effect of inflation on growth," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 18(4), pages 697-714, October.
  7. Serkan Erkam & Tarkan Cavusoglu, 2008. "Modelling Inflation Uncertainty In Transition Economies:The Case Of Russia And The Former Soviet Republics," Economic Annals, Faculty of Economics, University of Belgrade, vol. 53(178-179), pages 44-71, July - De.
  8. Stanley Fischer & Ratna Sahay, 2000. "The Transition Economies After Ten Years," NBER Working Papers 7664, National Bureau of Economic Research, Inc.
  9. 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.
  10. Cukierman, Alex & Miller, Geoffrey P. & Neyapti, Bilin, 2002. "Central bank reform, liberalization and inflation in transition economies--an international perspective," Journal of Monetary Economics, Elsevier, vol. 49(2), pages 237-264, March.
  11. Evans, Martin, 1991. "Discovering the Link between Inflation Rates and Inflation Uncertainty," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(2), pages 169-184, May.
  12. Dibooglu, Sel & Kutan, Ali M., 2005. "Sources of inflation and output movements in Poland and Hungary: Policy implications for accession to the economic and monetary union," Journal of Macroeconomics, Elsevier, vol. 27(1), pages 107-131, March.
  13. Ball, Laurence, 1992. "Why does high inflation raise inflation uncertainty?," Journal of Monetary Economics, Elsevier, vol. 29(3), pages 371-388, June.
  14. Andrej Susjan & Tjasa Redek, 2008. "Uncertainty and Growth in Transition Economies," Review of Social Economy, Taylor & Francis Journals, vol. 66(2), pages 209-234.
  15. Max Gillman & Anton Nakov, 2004. "Granger causality of the inflation-growth mirror in accession countries," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 12(4), pages 653-681, December.
  16. Fountas, Stilianos & Karanasos, Menelaos, 2007. "Inflation, output growth, and nominal and real uncertainty: Empirical evidence for the G7," Journal of International Money and Finance, Elsevier, vol. 26(2), pages 229-250, March.
  17. Taylor, John B, 1979. "Estimation and Control of a Macroeconomic Model with Rational Expectations," Econometrica, Econometric Society, vol. 47(5), pages 1267-1286, September.
  18. Tolga OMAY & Nilay ALUFTEKIN & Ece C. KARADAGLI, 2010. "The Relationship Between Output Growth And Inflation: Evidence From Turkey," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 5(1(11)_Spr), pages 55-63.
  19. Pindyck, Robert S, 1991. "Irreversibility, Uncertainty, and Investment," Journal of Economic Literature, American Economic Association, vol. 29(3), pages 1110-1148, September.
  20. Ernst R. Berndt & Bronwyn H. Hall & Robert E. Hall & Jerry A. Hausman, 1974. "Estimation and Inference in Nonlinear Structural Models," NBER Chapters,in: Annals of Economic and Social Measurement, Volume 3, number 4, pages 653-665 National Bureau of Economic Research, Inc.
  21. Kutan, Ali M. & Yigit, Taner M., 2007. "European integration, productivity growth and real convergence," European Economic Review, Elsevier, vol. 51(6), pages 1370-1395, August.
  22. Blackburn, Keith & Galindev, Ragchaasuren, 2003. "Growth, volatility and learning," Economics Letters, Elsevier, vol. 79(3), pages 417-421, June.
  23. Nauro F. Campos & Abrizio Coricelli, 2002. "Growth in Transition: What We Know, What We Don't, and What We Should," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 793-836, September.
  24. Friedman, Milton, 1977. "Nobel Lecture: Inflation and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 451-472, June.
  25. 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.
  26. 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.
  27. Holland, A Steven, 1995. "Inflation and Uncertainty: Tests for Temporal Ordering," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(3), pages 827-837, August.
  28. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
  29. Frommel, Michael & Schobert, Franziska, 2006. "Exchange rate regimes in Central and East European countries: Deeds vs. words," Journal of Comparative Economics, Elsevier, vol. 34(3), pages 467-483, September.
  30. Blackburn, Keith, 1999. "Can Stabilisation Policy Reduce Long-Run Growth?," Economic Journal, Royal Economic Society, vol. 109(452), pages 67-77, January.
  31. John Thornton, 2007. "The Relationship between Inflation and Inflation Uncertainty in Emerging Market Economies," Southern Economic Journal, Southern Economic Association, vol. 73(4), pages 858-870, April.
  32. Maurice Obstfeld & Kenneth Rogoff, 1995. "The Mirage of Fixed Exchange Rates," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 73-96, Fall.
  33. Temple, Jonathan, 2000. " Inflation and Growth: Stories Short and Tall," Journal of Economic Surveys, Wiley Blackwell, vol. 14(4), pages 395-426, September.
  34. Fuhrer, Jeffrey C, 1997. "Inflation/Output Variance Trade-Offs and Optimal Monetary Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(2), pages 214-234, May.
  35. 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.
  36. Bollerslev, Tim, 1990. "Modelling the Coherence in Short-run Nominal Exchange Rates: A Multivariate Generalized ARCH Model," The Review of Economics and Statistics, MIT Press, vol. 72(3), pages 498-505, August.
  37. Kalin Hristov & Martin Zaimov, 2003. "Shadowing the euro: Bulgaria’s monetary policy five years on," BIS Papers chapters,in: Bank for International Settlements (ed.), Regional currency areas and the use of foreign currencies, volume 17, pages 61-78 Bank for International Settlements.
  38. Logue, Dennis E & Sweeney, Richard James, 1981. "Inflation and Real Growth: Some Empirical Results: A Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 13(4), pages 497-501, November.
  39. 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.
  40. Darko Bohnec, 2003. "Impact of EU enlargement: Challenges for Slovenia's monetary and exchange rate policies," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 31(4), pages 303-308, December.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:hac:hacwop:20128. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Aysen Arac)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.