Conrad, Christian ; Hartmann, Matthias
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Abstract
We examine how the interaction between monetary policy and macroeconomic conditions affects inflation uncertainty in the long-term. The unobservable inflation uncertainty is quantified by means of the slowly evolving long-term variance component of inflation in the framework of the Spline-GARCH model (Engle and Rangel, 2008). For a cross-section of 13 developed economies, we find that long-term inflation uncertainty is high if central bank governors are perceived as less inflation-averse and if the conduct of monetary policy is ad-hoc rather than rule-based.
| Document type: | Working paper |
|---|---|
| Series Name: | Discussion Paper Series, University of Heidelberg, Department of Economics |
| Volume: | 0574 |
| Place of Publication: | Heidelberg |
| Date Deposited: | 21 Oct 2014 09:56 |
| Date: | October 2014 |
| Number of Pages: | 43 |
| Faculties / Institutes: | The Faculty of Economics and Social Studies > Alfred-Weber-Institut for Economics |
| DDC-classification: | 330 Economics |
| Uncontrolled Keywords: | Inflation uncertainty, Central banking, Spline-GARCH. |
| Series: | Discussion Paper Series / University of Heidelberg, Department of Economics |
