Inflation, Inflation Uncertainty and a Common European Monetary Policy
By A. Cukierman, S. Johansen, Marika Karanassou, P. Mizen. 2004
123 citations recorded by the source corpus.
The relationship between inflation and inflation uncertainty is investigated in six European Union countries for the period 1960-99. Exponential generalized autoregressive conditional heteroscedasticity models are used to generate a measure of inflation uncertainty and then Granger methods are employed to test for causality between average inflation and inflation uncertainty. In all the European countries except Germany, inflation significantly raises inflation uncertainty as predicted by Friedman. However, in all countries except the UK, inflation uncertainty does not cause negative output effects, implying that a common European monetary policy applied by the European Central Bank might lead to asymmetric real effects via the inflation uncertainty channel. Less robust evidence is found regarding the direction of the impact of a change in inflation uncertainty on inflation. In Germany and the Netherlands, increased inflation uncertainty lowers inflation, while in Italy, Spain and, to a lesser extent, France increased inflation uncertainty raises inflation. These results are generally consistent with the existing rankings of central bank independence.
Subfields: Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/96cbd7cc13d5c7ce6f4a658de05e14309703469d
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In Economics and Econometrics
- Menelaos Karanasos
- Stilianos Fountas
- Jinki Kim
- Guiglielmo Maria Caporale
- Alexandros Kontonikas
- Christian Conrad
- James E. Payne
Citations in the corpus
- The Euro and Inflation Uncertainty in the European Monetary Union (2009, methodology): “(2004). However, as pointed out by Grier and Perry (1998) and Fountas et al (2004) ,”
- Inflation Uncertainty, Output Growth Uncertainty and Macroeconomic Performance (2006, background): “Fountas et al. (2004a), testing this hypothesis using data for six European countries, find mixed evidence.”
- Inflation, output growth, and nominal and real uncertainty: Empirical evidence for the G7 (2007, methodology): “First, uniform strong evidence (at 1%, or better) for the first leg of the Friedman hypothesis applies in all countries, except Germany. The negative and significant effect for Germany squares with the traditionally conservative stance of the Bundesbank and the credibility it has accumulated over th”