The Impact of Inflation Uncertainty on Economic Growth: A MRS-IV Approach
In this paper, we propose an analytical framework to explore the level and volatility effects of inflation on the output gap. Using quarterly US data over 1977:q2-2009:q4, we then examine the empirical implications of the model by implementing an instrumental variables Markov regime switching approach. We show that inflation uncertainty has a negative and regime dependent impact on the output gap but the level of inflation does not have any such e ect. Our empirical investigation also provides evidence that the US economy is moving towards a period of turmoil before the recent financial crisis was imminent. The results are robust to the use of alternative measures of inflation uncertainty.
|Date of creation:||2012|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +44 114 222 3399
Fax: + 44 (0)114 222 3458
Web page: http://www.shef.ac.uk/economics
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:shf:wpaper:2012025. 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: (Jacob Holmes)
If references are entirely missing, you can add them using this form.