Caglayan, M., Kocaaslan, O.K. and Mouratidis, K. (2015) Effects of Inflation on Output Gap: A MRS-IV Approach. Review of Economic Analysis, 7 (1). pp. 3-23. ISSN 1973-3909
Abstract
In this paper, we propose an analytical framework to explore the level and volatility effects of inflation on the output gap. Using quarterly US data over 1977:q2-2009:q4, we then examine the empirical implications of the model by implementing an instrumental variables Markov regime switching approach. We show that inflation uncertainty has a negative and regime dependent impact on the output gap but the level of inflation does not have any such effect. Our empirical investigation also provides evidence that the US economy is moving towards a period of turmoil before the recent financial crisis was imminent. The results are robust to the use of alternative measures of inflation uncertainty.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2015 The Author(s). The Review of Economic Analysis requires that authors release their work under Creative Commons Attribution Non-Commercial license (https://creativecommons.org/licenses/by-nc/3.0/). This license allows anyone to copy, distribute and transmit the work provided the use is non-commercial and appropriate attribution is given. |
Keywords: | E31; E32; Output gap; inflation uncertainty; Markov-switching modeling; instrumental variables; endogeneity |
Dates: |
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Institution: | The University of Sheffield |
Academic Units: | The University of Sheffield > Faculty of Social Sciences (Sheffield) > Department of Economics (Sheffield) |
Depositing User: | Symplectic Sheffield |
Date Deposited: | 22 Sep 2016 10:38 |
Last Modified: | 22 Sep 2016 10:38 |
Published Version: | http://www.rofea.org/index.php?journal=journal&pag... |
Status: | Published |
Publisher: | Rimini Centre for Economic Analysis |
Refereed: | Yes |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:104952 |