Testing for Rate-Dependence and Asymmetry in Inflation Uncertainty:Evidence from the G7 Economies

Olan T. Henry, Nilss Olekalns () and Sandy Suardi

No 959, Department of Economics - Working Papers Series from The University of Melbourne

Abstract: The Friedman-Ball hypothesis implies a link between the inflation rate and inflation uncertainty. In this paper we employ a new test for the joint null hypothesis of no dependence effects and no asymmetry in the G7 inflation volatility. The results show that higher inflationrates operate additively via the conditional variance of inflation to induce greater inflation uncertainty in the U.S., U.K. and Canada. In addition, positive inflationary shocks are found to generate greater inflation uncertainty than negative shocks of a similar magnitude in the U.K. and Canada.

Keywords: Friedman-Ball hypothesis; Asymmetry; Davies’ Problem (search for similar items in EconPapers)
JEL-codes: E39 (search for similar items in EconPapers)
Pages: 11 pages
Date: 2006
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Related works:
Journal Article: Testing for rate dependence and asymmetry in inflation uncertainty: Evidence from the G7 economies (2007)
Working Paper: Testing for Rate-Dependence and Asymmetry in Inflation Uncertainty: Evidence from the G7 Economies
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