Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/127324
Authors: 
Conrad, Christian
Karanasos, Menelaos
Year of Publication: 
2010
Series/Report no.: 
Discussion Paper Series, University of Heidelberg, Department of Economics 507
Abstract: 
This paper employs an augmented version of the UECCC GARCH specification proposed in Conrad and Karanasos (2010) which allows for lagged in-mean effects, level effects as well as asymmetries in the conditional variances. In this unified framework we examine the twelve potential intertemporal relationships between inflation, growth and their respective uncertainties using US data. We find that high inflation is detrimental to output growth both directly and indirectly via the nominal uncertainty. Output growth boosts inflation but mainly indirectly through a reduction in real uncertainty. Our findings highlight that macroeconomic performance affects nominal and real uncertainty in many ways and that the bidirectional relation between inflation and growth works to a large extend indirectly via the uncertainty channel.
Subjects: 
Bivariate GARCH process
volatility feedback
inflation uncertainty
output variability
JEL: 
E31
C51
C32
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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