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Uncertainty shocks and inflation dynamics in the U.S

Author

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  • Qazi Haque

    (Economics Discipline, Business School, University of Western Australia)

  • Leandro M. Magnusson

    (Economics Discipline, Business School, University of Western Australia)

Abstract

We estimate a time-varying parameter VAR (TVP-VAR) with stochastic volatility using post-WWII U.S. data to study the effects of uncertainty shocks on inflation. We find the response of inflation to be statistically insignificant until mid-to-late 1990s and negative thereafter. Our findings suggest that uncertainty shocks do not propagate like aggregate supply shocks and look like aggregate demand shocks since late 1990s.

Suggested Citation

  • Qazi Haque & Leandro M. Magnusson, 2020. "Uncertainty shocks and inflation dynamics in the U.S," Economics Discussion / Working Papers 20-25, The University of Western Australia, Department of Economics.
    • Handle: RePEc:uwa:wpaper:20-25
    Note: MD5 = 16da83f3bd01708a6a28d0d5e9568a60
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Research Review | 27 November 2020 | Inflation
      by James Picerno in The Capital Spectator on 2020-11-27 05:02:31

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    More about this item

    Keywords

    Uncertainty shocks; inflation dynamics; TVP-VARs with stochastic volatility;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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