Financial Market Volatility and Inflation Uncertainty - An Empirical Investigation. February 1999, 15 pp
Using monthly data for Germany from 1968 through 1998, the relationship between fluctuations of prices in financial markets and inflation is analyzed. The results of Granger-causality tests reveal that stock market has no predictive power volatility for inflation uncertainty, et vice versa. Regarding the subsequent volatility of short-term and of long-term interest rate. In contrast, inflation uncertainty provides some information. The hypothesis of a causality running from the volatility of the real exchange rate to inflation uncertainty cannot be rejected.
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