The Inflation‐Output Variability Trade‐off: OECD Evidence

Jim Lee

Contemporary Economic Policy, 2004, vol. 22, issue 3, 344-356

Abstract: This article employs a multivariate GARCH model to empirically estimate a possible trade‐off between output variability and inflation volatility in light of OECD data over the 1984–2001 period. Statistical support for the hypothesized volatility trade‐off is equivocal across countries. The mixed findings can be associated with central banks' varying monetary policy responses to exogenous shocks. The trade‐off estimates are also found to be consistent with earlier studies that reveal different degrees of central bank commitment to price vis‐à‐vis output stability. (JEL E30, E58, C32)

Date: 2004
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