Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/267584 
Year of Publication: 
2020
Citation: 
[Journal:] Baltic Journal of Economics [ISSN:] 2334-4385 [Volume:] 20 [Issue:] 2 [Publisher:] Taylor & Francis [Place:] London [Year:] 2020 [Pages:] 218-242
Publisher: 
Taylor & Francis, London
Abstract: 
This paper investigates how inflation and its uncertainty impact GDP growth in eight Central and Eastern European Countries. Inflation uncertainty series are created examining several GARCH models in combination with three different distribution functions, while the nonlinear effect of inflation and its uncertainty on GDP growth is assessed in the Bayesian quantile regression framework. We find that inflation has significantly smaller negative effect on GDP growth than inflation uncertainty, which confirms the Friedman hypothesis. This means that inflation in the selected countries has an indirect impact on GDP growth via inflation uncertainty. We find that countries with smaller economy, such as Latvia and Estonia experience more adverse effect from inflation uncertainty in both upturn and downturn conditions, probably because they are vulnerable to external inflationary shocks. As for the countries with bigger economy, inflation uncertainty shocks diminish GDP growth only in conditions when output growth is very low or negative.
Subjects: 
Bayesian quantile regression
GARCH
GDP growth
Inflation
inflation uncertainty
JEL: 
C11
C21
E23
E31
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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