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

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  • Stilianos Fountas

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

Abstract

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.

Suggested Citation

  • Stilianos Fountas, 2000. "The Relationship between Inflation and Inflation Uncertainty in the UK: 1885-1998," Working Papers 0048, National University of Ireland Galway, Department of Economics, revised 2000.
  • Handle: RePEc:nig:wpaper:0048
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    References listed on IDEAS

    as
    1. 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.
    2. 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.
    3. 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.
    4. 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.
    5. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
    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 169-184, May.
    7. Ball, Laurence, 1992. "Why does high inflation raise inflation uncertainty?," Journal of Monetary Economics, Elsevier, vol. 29(3), pages 371-388, June.
    8. Stilianos Fountas & Menelaos Karanasos & Marika Karanassou, "undated". "A GARCH Model of Inflation and Inflation Uncertainty with Simultaneous Feedback," Discussion Papers 00/24, Department of Economics, University of York.
    9. 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 409-421, August.
    10. Friedman, Milton, 1977. "Nobel Lecture: Inflation and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 451-472, 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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    More about this item

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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