Title

Asymmetric Effects of Inflation Shocks on Inflation Uncertainty

Document Type

Article

Publication Date

12-2002

Publication Source

Atlantic Economic Journal

Abstract

The empirically documented regularity that disinflationary shocks are associated with larger output changes than are positive shocks presents an interesting puzzle to macroeconomists. This paper presents, and empirically supports, a new explanation for this asymmetry. The authors show, using a TARCH model, that negative inflationary shocks result in greater inflation uncertainty than positive shocks. As Friedman {1977) argues, and a body of empirical evidence demonstrates, inflation uncertainty leads to lower output growth. Drawing on this explanation, this essay points to an avenue by which the output asymmetry of inflationary shocks can be explained. (JEL E30, E31)

Inclusive pages

385-388

ISBN/ISSN

0197-4254

Publisher

Kluwer Academic Publishers

Volume

30

Issue

4

Peer Reviewed

yes