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Bulletin of Monetary Economics and Banking

Document Type

Article

Abstract

This paper examines the interrelationship between inflation, inflation uncertainty, growth, and growth uncertainty. We find a negative effect of output uncertainty on output growth and a positive effect of output growth on output uncertainty. Inflation uncertainty has a negative effect on the inflation rate, suggesting that there is a stabilizing motive during high periods of high inflation, where the policy lowers inflation uncertainty to minimize the economic welfare costs of deflationary actions. However, inflation has a positive effect on inflation uncertainty suggesting that agents may devote more resources to inflation forecasting in a rising inflation environment, which reduces uncertainty. We also find a negative relation between inflation and growth, suggesting that a moderate trend of growth and inflation should be maintaine to achieve desirable effects on the economy.

First Page

39

Last Page

68

Creative Commons License

Creative Commons Attribution-NonCommercial 4.0 International License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

Country

Hungary

Affiliation

Corvinus University of Budapest

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