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.
"INTERLINKAGE OF MACROECONOMIC UNCERTAINTY AND MACROECONOMIC PERFORMANCE: EVIDENCE FROM ASEAN-5 COUNTRIES PANEL VAR,"
Bulletin of Monetary Economics and Banking: Vol. 26:
1, Article 9.
Available at: https://bulletin.bmeb-bi.org/bmeb/vol26/iss1/9