Inflation, inflation uncertainty and output growth: what does the data say for Malaysia?
Purpose: The purpose of this paper is to examine the causal relationships between inflation, output growth and their uncertainties in Malaysia.Design/methodology/approach: The modeling approach allows for structural breaks to avoid the masking of specific impacts. Findings: Based on the asymmetric G...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Emerald Group Publishing Limited
2014
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| Online Access: | http://psasir.upm.edu.my/id/eprint/34175/ http://psasir.upm.edu.my/id/eprint/34175/1/Inflation%2C%20inflation%20uncertainty%20and%20output%20growth%20what%20does%20the%20data%20say%20for%20Malaysia.pdf |
| Summary: | Purpose: The purpose of this paper is to examine the causal relationships between inflation, output growth and their uncertainties in Malaysia.Design/methodology/approach: The modeling approach allows for structural breaks to avoid the masking of specific impacts. Findings: Based on the asymmetric Generalized Autoregressive Conditional Heteroskedasticity model, the paper found strong evidence favoring a positive effect of a change in the inflation uncertainty as predicted by the Friedman-Ball hypothesis. In addition, inflation (inflation uncertainty) has direct (indirect) negative effect on the output growth. The results are consistent with the Taylor effect – increases in inflation uncertainty decreases output uncertainty. The analysis also reveals that economic uncertainty lowers the growth rate of output, complying with Bernanke's idea.
Originality/value: The present study suggests that extra efforts are required to locate the breaks in the variance in order to draw concrete evidence on link between economic uncertainty and macroeconomic performance. |
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