The Relationship between Inflation, output growth, and their Uncertainties: Evidence from selected CEE countries

Mübariz Hasanov and Tolga Omay

No 20128, Hacettepe University Department of Economics Working Papers from Hacettepe University, Department of Economics

Abstract: In this paper, we examine causal relationships among inflation rate, output growth rate, inflation uncertainty and output uncertainty for ten Central and Eastern European transition countries. For this purpose, we estimate a bivariate GARCH model that includes output growth and inflation rates for each country. Then we use conditional standard deviations of inflation and output to proxy nominal and real uncertainty, respectively, and perform Granger-causality tests. Our results suggest that inflation rate induces uncertainty about both inflation rate and output growth rate, which is detrimental for real economic activity. On the other hand, we find that output growth rate reduces macroeconomic uncertainty. In addition, we also examine and discuss causal relationships among remaining variables.

Keywords: Inflation; Output growth; Uncertainty; Granger-Causality Tests; Transition Countries (search for similar items in EconPapers)
JEL-codes: C32 C51 C52 E10 E30 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2012
New Economics Papers: this item is included in nep-eec, nep-fdg, nep-mac, nep-mon and nep-tra
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: The Relationship Between Inflation, Output Growth, and Their Uncertainties: Evidence from Selected CEE Countries (2011)
Working Paper: The relationship between inflation, output growth, and their uncertainties: Evidence from selected CEE countries (2010)
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