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      The effect of inflation uncertainty on inflation: stochastic volatility in mean model within a dynamic framework

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      Author
      Berument, Hakan
      Yalcin, Y.
      Yildirim J.
      Date
      2009
      Source Title
      Economic Modelling
      Print ISSN
      0264-9993
      Electronic ISSN
      1873-6122
      Publisher
      Elsevier BV
      Volume
      26
      Issue
      6
      Pages
      1201 - 1207
      Language
      English
      Type
      Article
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      Abstract
      This paper investigates the effect of inflation uncertainty innovations on inflation over time by considering the monthly United States data for the time period 1976-2006. In order to investigate the effect of inflation uncertainty innovation on inflation, a Stochastic Volatility in Mean model (SVM) has been employed. SVM models are generally used to capture the innovation to inflation uncertainty, which cannot be achieved in the framework of popular deterministic ARCH type of models. Empirical evidence provided here suggests that innovations in inflation volatility increases inflation persistently. This evidence is robust across various definitions of inflation and different sub-periods. © 2009 Elsevier B.V. All rights reserved.
      Keywords
      Inflation
      Inflation uncertainty
      Stochastic volatility models
      Permalink
      http://hdl.handle.net/11693/22579
      Published Version (Please cite this version)
      http://dx.doi.org/10.1016/j.econmod.2009.05.007
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