Inflation uncertainty, growth uncertainty, oil prices, and output growth in the UK

Ramprasad Bhar () and Girijasankar Mallik ()

Empirical Economics, 2013, vol. 45, issue 3, 1333-1350

Abstract: This study examines the transmission and response of inflation uncertainty and output uncertainty on inflation and output growth in the UK using a bi-variate EGARCH model. Results suggest that inflation uncertainty has positive and significant effects on inflation before the inflation-targeting period, but that the effect is significantly negative after the inflation-targeting period. On the other hand, output uncertainty has a negative and significant effect on inflation and a positive effect on growth, while oil price rises significantly increase inflation for the UK. Results also indicate that inflation uncertainty significantly reduces output growth before and after the inflation-targeting period. These findings are robust and the Generalized impulse response functions corroborate the conclusions. These results have important implications for an inflation-targeting monetary policy, and for stabilization policy in general. Copyright Springer-Verlag Berlin Heidelberg 2013

Keywords: Inflation; Inflation uncertainty; EGARCH; Impulse response; E31; E52; E63; E64 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (25)

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DOI: 10.1007/s00181-012-0650-9

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