The Euro and inflation uncertainty in the European Monetary Union

Guglielmo Maria Caporale and Alexandros Kontonikas ()

Journal of International Money and Finance, 2009, vol. 28, issue 6, 954-971

Abstract: This paper adopts a time-varying GARCH framework to estimate short-run and steady-state inflation uncertainty in 12 EMU countries, and then investigates their relationship with inflation. The effects of the Euro introduction in 1999 are examined by utilising a dummy variable. Tests for endogenously determined breaks are also employed. We find a considerable degree of heterogeneity across EMU countries in terms of average inflation, its degree of persistence, and both types of uncertainty, whilst the trend component of inflation is generally decreasing. Various breaks in the relationship between inflation and inflation uncertainty are found, frequently well before the Euro introduction.

Keywords: Inflation; Inflation; uncertainty; Inflation; persistence; Time-varying; parameters; GARCH; models; ECB; EMU (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (47)

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Related works:
Working Paper: The Euro and Inflation Uncertainty in the European Monetary Union (2007)
Working Paper: THE EURO AND INFLATION UNCERTAINTY IN THE EUROPEAN MONETARY UNION (2006)
Working Paper: The Euro and Inflation Uncertainty in the European Monetary Union (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:28:y:2009:i:6:p:954-971

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