Inflation and Economic Activity in Advanced and Emerging Economies

Forthcoming in: International Journal of Finance and Economics

48 Pages Posted: 28 Jan 2021

See all articles by Apostolos Serletis

Apostolos Serletis

University of Calgary - Department of Economics

Jinan Liu

University of Calgary - Department of Economics

Date Written: December 7, 2020

Abstract

Although the inflation rates have been low in recent years, the uncertainties that put downward pressure on inflation remain the key uncertainties that economies around the world are facing, and they could be unexpectedly persistent. In this paper, we investigate the relationship between nominal uncertainty and macroeconomic performance in the G7 and EM7 countries. We use a bivariate VARMA GARCH-in-Mean asymmetric BEKK model to estimate the response of output growth to inflation uncertainty. We find that inflation uncertainty is persistent in most of the G7 and EM7 countries. The uncertainty surrounding future inflation lowers output growth in most of the G7 countries, however, the effect is mixed in the EM7 countries.

Keywords: Inflation uncertainty, Output, GARCH-in-Mean structural VAR

JEL Classification: C22, F33

Suggested Citation

Serletis, Apostolos and Liu, Jinan, Inflation and Economic Activity in Advanced and Emerging Economies (December 7, 2020). Forthcoming in: International Journal of Finance and Economics , Available at SSRN: https://ssrn.com/abstract=3744306 or http://dx.doi.org/10.2139/ssrn.3744306

Apostolos Serletis (Contact Author)

University of Calgary - Department of Economics ( email )

2500 University Drive, NW
Calgary, Alberta T2N 1N4
Canada
403 220-4091 (Phone)
403 282-5262 (Fax)

Jinan Liu

University of Calgary - Department of Economics ( email )

2500 University Drive, NW
Calgary, Alberta T2N 1N4
Canada

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
7
Abstract Views
61
PlumX Metrics