Inflation and inflation uncertainty in the G-7 countries

Date

2005

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Source Title

Physica A : Statistical Mechanics and its Applications

Print ISSN

0378-4371

Electronic ISSN

1873-2119

Publisher

Elsevier BV

Volume

348

Issue

Pages

371 - 379

Language

English

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Abstract

This study examines the relationship between inflation and inflation uncertainty in the G-7 countries for the period from 1957 to 2001. The causality between the inflation and inflation uncertainty is tested by using the Full Information Maximum Likelihood Method with extended lags. Our results suggest that inflation causes inflation uncertainty for all the G-7 countries, while inflation uncertainty causes inflation for Canada, France, Japan, the UK and the US. Furthermore, we find that in four countries (Canada, France, the UK and the US) increased uncertainty lowers inflation, and in only one country (Japan), increased uncertainty raises inflation. © 2004 Elsevier B.V. All rights reserved.

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