Tsyplakov, Alexander (2010): The links between inﬂation and inﬂation uncertainty at the longer horizon.
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In this paper I examine the Okun–Friedman hypothesis of the link between inﬂation and inﬂation uncertainty using historical international data on the monthly CPI. An indicator of inﬂation uncertainty at the two-years-ahead horizon is derived from a time-series model of inﬂation with time-varying parameters by means of Monte Carlo simulations. This indicator is compared to other uncertainty measures, with the short forecast horizon and based on simpler GARCH-type models. The analysis convincingly demonstrates that both the longer horizon and changing parameters are important for the regularity. The evidence obtained strongly supports the Okun–Friedman hypothesis both in the time dimension for most countries and across countries.
|Item Type:||MPRA Paper|
|Original Title:||The links between inﬂation and inﬂation uncertainty at the longer horizon|
|Keywords:||inﬂation uncertainty, inﬂation forecasting, Okun–Friedman hypothesis, nonlinear state space models, scoring rules|
|Subjects:||C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C29 - Other
C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy
C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes
|Depositing User:||Alexander Tsyplakov|
|Date Deposited:||22. Nov 2010 19:34|
|Last Modified:||11. Feb 2013 11:41|
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