Please use this identifier to cite or link to this item:
Title: Inflation and inflation uncertainty in the Euro area
Authors: Caporale, GM
Onorante, L
Paesani, P
Keywords: Inflation;Inflation uncertainty;Time-varying parameters;GARCH models;ECB;EMU
Issue Date: 2009
Publisher: Brunel University
Citation: Economics and Finance Working Paper, Brunel University, 09-31
Abstract: This paper estimates a time-varying AR-GARCH model of inflation producing measures of inflation uncertainty for the euro area, and investigates the linkages between them in a VAR framework, also allowing for the possible impact of the policy regime change associated with the start of EMU in 1999. The main findings are as follows. Steady-state inflation and inflation uncertainty have declined steadily since the inception of EMU, whilst short-run uncertainty has increased, mainly owing to exogenous shocks. A sequential dummy procedure provides further evidence of a structural break coinciding with the introduction of the euro and resulting in lower long-run uncertainty. It also appears that the direction of causality has been reversed, and that in the euro period the Friedman-Ball link is empirically supported, implying that the ECB can achieve lower inflation uncertainty by lowering the inflation rate.
Appears in Collections:Economics and Finance
Dept of Economics and Finance Research Papers

Files in This Item:
File Description SizeFormat 
0931[1].pdf317.44 kBAdobe PDFView/Open

Items in BURA are protected by copyright, with all rights reserved, unless otherwise indicated.