Inflation Uncertainty and Output

Mthuli Ncube () and Eliphas Ndou

Chapter 3 in Monetary Policy and the Economy in South Africa, 2013, pp 25-39 from Palgrave Macmillan

Abstract: Abstract This chapter introduces the relationship between output and inflation, including the role of inflation uncertainty. Friedman (1977) argued that increased inflation uncertainty reduces the information function of price movements and hinders long-term contracting, thus potentially reducing real output growth, and high inflation leads to higher inflation uncertainty. The chapter uses a generalized autoregressive conditional heteroscedasticity-in-mean (GARCH-M) framework to investigate why price stability as a mandate for monetary policy authorities is significant.

Keywords: Monetary Policy; Central Bank; Output Growth; GARCH Model; Inflation Uncertainty (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-137-33415-2_3

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DOI: 10.1057/9781137334152_3

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