Testing for Rate-Dependence and Asymmetry in Inflation Uncertainty: Evidence from the G7 Economies

Sandy Suardi, Ólan Henry and Nilss Olekalns ()

No 306, MRG Discussion Paper Series from School of Economics, University of Queensland, Australia

Abstract: The Friedman-Ball hypothesis implies a link between the inflation rate and inflation uncertainty. In this paper we employ a new test for the joint null hypothesis of no dependence effects and no asymmetry in the G7 inflation volatility. The results show that higher inflation rates operate additively via the conditional variance of inflation to induce greater inflation uncertainty in the U.S., U.K. and Canada. In addition, positive inflationary shocks are found to generate greater inflation uncertainty than negative shocks of a similar magnitude in the U.K. and Canada.

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Related works:
Journal Article: Testing for rate dependence and asymmetry in inflation uncertainty: Evidence from the G7 economies (2007)
Working Paper: Testing for Rate-Dependence and Asymmetry in Inflation Uncertainty:Evidence from the G7 Economies (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:qld:uqmrg6:03

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