Testing for rate dependence and asymmetry in inflation uncertainty: Evidence from the G7 economies

This paper employs a new test for level effects and asymmetry in inflation volatility. Higher inflation rates induce greater inflation uncertainty for the U.S., U.K. and Canada. UK and Canadian inflation volatility responds asymmetrically to positive and negative inflation shocks.

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Bibliographic Details
Published in:Economics letters 2007-03, Vol.94 (3), p.383-388
Main Authors: Henry, Ólan T., Olekalns, Nilss, Suardi, Sandy
Format: Article
Language:English
Subjects:
Asymmetry
Davies' Problem
Friedman-Ball hypothesis
G-7
Inflation
Volatility
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Description
Summary:This paper employs a new test for level effects and asymmetry in inflation volatility. Higher inflation rates induce greater inflation uncertainty for the U.S., U.K. and Canada. UK and Canadian inflation volatility responds asymmetrically to positive and negative inflation shocks.
ISSN:0165-1765
1873-7374
DOI:10.1016/j.econlet.2006.08.024