Reassessing the inflation uncertainty‐inflation relationship in the tails

Georgios Bampinas (), Panagiotis Konstantinou and Theodore Panagiotidis

Bulletin of Economic Research, 2021, vol. 73, issue 4, 508-534

Abstract: We revisit the relationship between inflation and its uncertainty, using monthly US data from 1947 to 2014. We employ the cross–quantilogram approach introduced by Han, Linton, Oka, and Whang (2016), that allows testing for directional predictability across the different segments of the conditional distribution. Our results show that the US inflation‐uncertainty relation is non‐monotonic and asymmetric, while is more pronounced in the tails. Low inflation does not lead to lower long‐term inflation uncertainty. The evidence also suggests that inflation–uncertainty future realizations differ substantially in response to large positive/negative shocks.

Date: 2021
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https://doi.org/10.1111/boer.12263

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Persistent link: https://EconPapers.repec.org/RePEc:bla:buecrs:v:73:y:2021:i:4:p:508-534

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