Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Macroeconomic Modeling and Forecasting Performance D11-V2
This paper employs the unrestricted extended constant conditional correlation GARCH specification proposed in Conrad and Karanasos (2010) to examine the intertemporal relationship between the uncertainties of inflation and output growth in the US. We find that inflation uncertainty effects output variability positively, while output variability has a negative effect on inflation uncertainty. In addition, we find a negative/positive relation between nominal uncertainty and output growth/inflation. Finally, both lagged inflation as well as lagged output growth have a positive/negative effect on nominal/real uncertainty.
Bivariate GARCH process negative volatility feedback inflation uncertainty output variability