Inflation and Uncertainty: Tests for Temporal Ordering

Holland, A. Steven

doi:10.2307/2077753

Cited by 195 publications

(181 citation statements)

References 12 publications

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“…A more technical argument by Holland (1995) stressing the role of uncertainty about functioning of inflation process is also compatible with the evidence as long as the TV-AR model provides a good enough description of inflation. For the models by Cukierman and Meltzer (1986), Devereux (1989) and Geraats (2006) it is not clear how to explain the observed patterns of cross-correlations between inflation and inflation uncertainty.…”

Section: Discussionsupporting

confidence: 62%

“…To some extent the idea applies to the basic model (2) analyzed below (cf. Holland (1995) where a similar observation is made about the model of Evans and Wachtel (1993)). …”

Section: Research Background Basic Model and Discussion Of Inflationmentioning

confidence: 54%

“…See Wachtel (1977), Pagan, Hall, and Trivedi (1983), Zarnowitz and Lambros (1987), Ungar and Zilberfarb (1993), Holland (1995), Davis and Kanago (1998), Davis and Kanago (2000).…”

Section: Inflation-uncertainty Literature: Empirical Evidencementioning

confidence: 99%

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The Links between Inﬂation and Inﬂation Uncertainty at the Longer Horizon

Tsyplakov

2010

SSRN Journal

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In this paper I examine the Okun-Friedman hypothesis of the link between inflation and inflation uncertainty using historical international data on the monthly CPI. An indicator of inflation uncertainty at the two-years-ahead horizon is derived from a time-series model of inflation with time-varying parameters by means of Monte Carlo simulations. This indicator is compared to other uncertainty measures, with the short forecast horizon and based on simpler GARCH-type models. The analysis convincingly demonstrates that both the longer horizon and changing parameters are important for the regularity. The evidence obtained strongly supports the Okun-Friedman hypothesis both in the time dimension for most countries and across countries.

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Section: Discussionsupporting

confidence: 62%

“…To some extent the idea applies to the basic model (2) analyzed below (cf. Holland (1995) where a similar observation is made about the model of Evans and Wachtel (1993)). …”

Section: Research Background Basic Model and Discussion Of Inflationmentioning

confidence: 54%

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The Links between Inﬂation and Inﬂation Uncertainty at the Longer Horizon

Tsyplakov

2010

SSRN Journal

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“…Cukierman and Meltzer's (1986) model explains the positive association between the two variables. In the words of Holland (1995): 'The policy maker chooses monetary control procedures that are less precise, so that uncertainty about inflation is higher. The reason is that greater ambiguity about the contact of monetary policy makes it easier for the government to create the monetary surprises that increase output.…”

Section: The Effects Of Inflation Variabilitymentioning

confidence: 99%

“…This causes the rate of inflation to be higher on average': ℎ + → . On the other hand, one possible reason for greater nominal variability to precede lower inflation is that an increase in uncertainty is viewed by policymakers as costly, inducing them to reduce inflation in the future (Holland, 1995). We will refer to this negative effect as the Holland conjecture: ℎ − → .…”

Section: The Effects Of Inflation Variabilitymentioning

confidence: 99%

Modeling the Link between US Inflation and Output: The Importance of the Uncertainty Channel

Conrad

Karanasos

2010

SSRN Journal

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This paper employs an augmented version of the UECCC GARCH specification proposed in Conrad and Karanasos (2010) which allows for lagged in-mean effects, level effects as well as asymmetries in the conditional variances. In this unified framework we examine the twelve potential intertemporal relationships between inflation, growth and their respective uncertainties using US data. We find that high inflation is detrimental to output growth both directly and indirectly via the nominal uncertainty. Output growth boosts inflation but mainly indirectly through a reduction in real uncertainty. Our findings highlight that macroeconomic performance affects nominal and real uncertainty in many ways and that the bidirectional relation between inflation and growth works to a large extend indirectly via the uncertainty channel.Keywords: Bivariate GARCH process, volatility feedback, inflation uncertainty, output variability.JEL Classification: C32, C51, E31. * We would like to thank James Davidson, Marika Karanassou and Ruey Tsay for their valuable suggestions. We have also benefited from the comments received from the participants of the Annual Meeting of the Verein für Socialpolitik (Kiel, 2010), the Annual Meeting of the Society for Nonlinear Dynamics and Econometrics (Novara, 2010)

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The Relationship between Inflation and Inflation Uncertainty in Emerging Market Economies

Thornton

2007

Southern Economic Journal

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A standard Generalized Autoregressive Conditional Heteroskedastic (q,v) model is employed to construct a measure of monthly inflation uncertainty in 12 emerging market economies, and the relationship between inflation and inflation uncertainty is examined using Granger‐causality tests. The results suggest that higher inflation rates increased inflation uncertainty in all the economies, providing strong support for the Friedman hypothesis. The evidence on the effect of inflation uncertainty on average monthly inflation is more mixed, with increased inflation uncertainty leading to lower average inflation in Colombia, Israel, Mexico, and Turkey, consistent with the Holland hypothesis, but to higher average inflation in Hungary, Indonesia, and Korea, consistent with the hypothesis of Cukierman and Meltzer.

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Inflation and Uncertainty: Tests for Temporal Ordering

Cited by 195 publications

References 12 publications

The Links between Inﬂation and Inﬂation Uncertainty at the Longer Horizon

The Links between Inﬂation and Inﬂation Uncertainty at the Longer Horizon

Modeling the Link between US Inflation and Output: The Importance of the Uncertainty Channel

The Relationship between Inflation and Inflation Uncertainty in Emerging Market Economies

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