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The Relationship between Inflation and Inflation Uncertainty in the UK: 1885-1998

  • Stilianos Fountas

    (Department of Economics, National University of Ireland, Galway)

Using a long series of UK inflation data, I have provided strong evidence in favour of the hypothesis that inflationary periods are associated with high inflation uncertainty. This result supports the Friedman-Ball hypothesis and has important implications for the inflation-output relationship provided that more inflation uncertainty leads to lower output.

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Paper provided by National University of Ireland Galway, Department of Economics in its series Working Papers with number 0048.

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Date of creation: 2000
Date of revision: 2000
Publication status: Published in Economics Letters, Vol. 74, No. 1, 2001
Handle: RePEc:nig:wpaper:0048
Contact details of provider: Postal: St. Anthony's College, Newcastle Road, Galway
Phone: +353-91 524411 ext. 2501
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Web page: http://economics.nuigalway.ie

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  1. Fischer, Stanley, 1981. "Towards an understanding of the costs of inflation: II," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 15(1), pages 5-41, January.
  2. Stilianos Fountas & Menelaos Karanasos & Marika Karanassou, 2000. "A GARCH Model of Inflation and Inflation Uncertainty with Simultaneous Feedback," Working Papers 0047, National University of Ireland Galway, Department of Economics, revised 2000.
  3. 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.
  4. Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
  5. Friedman, Milton, 1977. "Nobel Lecture: Inflation and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 451-72, June.
  6. Evans, Martin, 1991. "Discovering the Link between Inflation Rates and Inflation Uncertainty," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(2), pages 169-84, May.
  7. Cosimano, Thomas F & Jansen, Dennis W, 1988. "Estimates of the Variance of U.S. Inflation Based upon the ARCH Model: A Comment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 20(3), pages 409-21, August.
  8. Engle, Robert F, 1983. "Estimates of the Variance of U.S. Inflation Based upon the ARCH Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 15(3), pages 286-301, August.
  9. Cukierman, Alex & Wachtel, Paul, 1979. "Differential Inflationary Expectations and the Variability of the Rate of Inflation: Theory and Evidence," American Economic Review, American Economic Association, vol. 69(4), pages 595-609, September.
  10. Ball, Laurence, 1992. "Why does high inflation raise inflation uncertainty?," Journal of Monetary Economics, Elsevier, vol. 29(3), pages 371-388, June.
  11. 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.
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