Please use this identifier to cite or link to this item:
http://bura.brunel.ac.uk/handle/2438/5119
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. |
URI: | http://bura.brunel.ac.uk/handle/2438/5119 |
Appears in Collections: | Economics and Finance Dept of Economics and Finance Research Papers |
Files in This Item:
File | Description | Size | Format | |
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0931[1].pdf | 317.44 kB | Adobe PDF | View/Open |
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