The links between inﬂation and inﬂation uncertainty at the longer horizon
MPRA Paper from University Library of Munich, Germany
In this paper I examine the Okun–Friedman hypothesis of the link between inﬂation and inﬂation uncertainty using historical international data on the monthly CPI. An indicator of inﬂation uncertainty at the two-years-ahead horizon is derived from a time-series model of inﬂation with time-varying parameters by means of Monte Carlo simulations. This indicator is compared to other uncertainty measures, with the short forecast horizon and based on simpler GARCH-type models. The analysis convincingly demonstrates that both the longer horizon and changing parameters are important for the regularity. The evidence obtained strongly supports the Okun–Friedman hypothesis both in the time dimension for most countries and across countries.
Keywords: inﬂation uncertainty; inﬂation forecasting; Okun–Friedman hypothesis; nonlinear state space models; scoring rules (search for similar items in EconPapers)
JEL-codes: C29 C32 E31 E52 C22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-for
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
https://mpra.ub.uni-muenchen.de/26908/1/MPRA_paper_26908.pdf original version (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:26908
Access Statistics for this paper
More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().