On Inflation and the Persistence of Shocks to Output

Richard Luger and Maral Kichian

Staff Working Papers from Bank of Canada

Abstract: This paper empirically investigates the possibility that the effects of shocks to output depend on the level of inflation. The analysis extends Elwood’s (1998) framework by incorporating in the model an inflation-threshold process that can potentially influence the stochastic properties of output. The value of this threshold parameter, if it exists, is considered to be unknown and is estimated in the model. The results indicate that shocks to output indeed have asymmetric effects, depending on the level of inflation: negative shocks are more detrimental when inflation is high, and positive shocks are more persistent when inflation is low.

Keywords: Econometric and statistical methods; Inflation: costs and benefits (search for similar items in EconPapers)
JEL-codes: E31 E32 E52 E58 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2001
New Economics Papers: this item is included in nep-mac
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Working Paper: On Inflation and the Persistence of shocks to Output (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:01-22

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