A GARCH Model of Inflation and Inflation Uncertainty with Simultaneous Feedback

Stilianos Fountas, Menelaos Karanasos and Marika Karanassou
Additional contact information
Menelaos Karanasos: University of York
Marika Karanassou: Queen Mary and Westfield College, University of London

No 414, Working Papers from Queen Mary University of London, School of Economics and Finance

Abstract: We examine the relationship between inflation and inflation uncertainty using a GARCH model that allows for simultaneous feedback between the conditional mean and variance of inflation. We also derive a number of theoretical econometric results and illustrate the relevance of these results with an empirical example of the US monthly inflation process. Our results show that there is strong evidence in favour of a positive bi-directional relationship between inflation and inflation uncertainty in agreement with the predictions of economic theory.

Keywords: Inflation; Inflation uncertainty; GARCH-M (search for similar items in EconPapers)
JEL-codes: C11 C14 C23 (search for similar items in EconPapers)
Date: 2000-05-01
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Citations: View citations in EconPapers (16)

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Related works:
Working Paper: A GARCH Model of Inflation and Inflation Uncertainty with Simultaneous Feedback (2000)
Working Paper: A GARCH Model of Inflation and Inflation Uncertainty with Simultaneous Feedback
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Persistent link: https://EconPapers.repec.org/RePEc:qmw:qmwecw:414

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