Inflation Regimes and the Sources of Inflation Uncertainty

Evans, Martin D.D.; Wachtel, Paul L.

doi:10.2307/2077719

Cited by 213 publications

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“…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 Inflationsupporting

confidence: 54%

“…A longer horizon (at least one year) would be more appropriate. The available empirical evidence also suggests that considering long-term uncertainty is important; see Ball and Cecchetti (1990), Evans (1991), Evans and Wachtel (1993), Kim (1993).…”

Section: Inflation-uncertainty Literature: Empirical Evidencementioning

confidence: 99%

“…He found strong correlation between inflation and the long-term uncertainty in the United States. Evans and Wachtel (1993) and Kim (1993) introduced a Markov-switching component into a time-series model of inflation to imitate regime shifts.…”

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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“…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 Inflationsupporting

confidence: 54%

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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“…Holland (1993) points out that unpredictable changes in inflation regime of the type considered in Evans and Wachtel (1993) lead to a relation between inflation and its uncertainty. In particular, if regime changes causes unpredictable changes in the persistence of inflation, then lagged inflation squared is positively related to inflation uncertainty.…”

Section: Which Ifmentioning

confidence: 99%

“…A series of papers, published during the last thirty years (see, for example, Logue and Sweeney, 1981, Evans, 1991, Brunner, 1993, Evans and Wachtel, 1993, Ungar and Zilberfarb, 1993, Holland, 1993, Fuhrer, 1997, Elder, 2004, highlights how important are the aforementioned causal relations for policy making and macroeconomic modeling.…”

Section: Introductionmentioning

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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Exploring Survey‐Based Inflation Forecasts

Gil-Alana

Moreno

Gracia

2011

Journal of Forecasting

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This paper first shows that survey-based expectations (SBE) outperform standard time series models in US quarterly inflation out-of-sample prediction and that the term structure of survey-based inflation forecasts has predictive power over the path of future inflation changes. It then proposes some empirical explanations for the forecasting success of survey-based inflation expectations. We show that SBE pool a large amount of heterogeneous information on inflation expectations and react more flexibly and accurately to macro conditions both contemporaneously and dynamically. We illustrate the flexibility of SBE forecasts in the context of the

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Inflation Regimes and the Sources of Inflation Uncertainty

Cited by 213 publications

References 0 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

Exploring Survey‐Based Inflation Forecasts

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