The Relationship Between Inflation, Output Growth, and Their Uncertainties: Evidence from Selected CEE Countries


Hasanov M., OMAY T.

EMERGING MARKETS FINANCE AND TRADE, cilt.47, ss.5-20, 2011 (SSCI İndekslerine Giren Dergi) identifier identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 47
  • Basım Tarihi: 2011
  • Doi Numarası: 10.2753/ree1540-496x4704s301
  • Dergi Adı: EMERGING MARKETS FINANCE AND TRADE
  • Sayfa Sayıları: ss.5-20

Özet

In this paper, we examine causal relationships between inflation rate, output growth rate, inflation uncertainty, and output uncertainty for ten Central and Eastern European transition countries. For this purpose, we estimate a bivariate GARCH model that includes output growth and inflation rates for each country. Then we use conditional standard deviations of inflation and output to proxy nominal and real uncertainty, respectively, and perform Granger causality tests. Our results suggest that inflation rate induces uncertainty about both inflation rate and output growth rate, which is detrimental to real economic activity. At the same time, we find that output growth rate reduces macroeconomic uncertainty in some countries. In addition, we also examine and discuss causal relationships between the remaining variables.