Inflation, output growth and their uncertainties: some multivariate GARCH-M evidence for Nigeria
Perekunah Eregha () and
Arcade Ndoricimpa ()
Journal of Social and Economic Development, 2022, vol. 24, issue 1, No 10, 197-210
Abstract The study applies a BEKK GARCH-M model to examine the effect of uncertainty on the levels of inflation and output growth in Nigeria. The results suggest a significant positive effect of inflation uncertainty on the level of inflation, supporting the Cukierman and Meltzer (Econometrica 54(5):1099–1128, 1987) hypothesis. In addition, uncertainty about inflation is found to be detrimental to output growth, supporting the Friedman’s (J Political Econ 85(3):451–472, 1977) hypothesis as it connotes greater risk to investment. Uncertainty about growth does not have a significant effect on both the levels of inflation and output growth. The evidence suggests the need to minimize inflation uncertainty to avoid its adverse effects on the economy by treating positive oil price shocks as temporal. In addition, the need to build domestic buffers through structural reforms to diversify the economy cannot be overemphasized in Nigeria.
Keywords: Inflation; Inflation uncertainty; Output; Output uncertainty; BEKK GARCH-M (search for similar items in EconPapers)
JEL-codes: C22 E0 (search for similar items in EconPapers)
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