Time-Varying Relationship between Inflation and Inflation Uncertainty


讲座时间:2018年10月26日 下午 13:30 - 15:00





This paper investigates whether the relationship between inflation and inflation uncertainty has changed and whether the change in this relationship has been gradual or abrupt. We extend the time-varying parameter with stochastic volatility in mean model (TVP-SVM) to include a mixture innovation disturbance in the time-varying parameter process. The proposed model produces more reliable estimates and allows us to investigate the occurrence of breaks in the gradually evolving process of the time varying coefficients. Using data of U.S., Germany, Canada and New Zealand, we find that: 1) the relationship between inflation and inflation uncertainty substantially varies over time; 2) there is strong support for the existence of abrupt changes in the US inflation-inflation uncertainty relationship; 3) our empirical results of Canada and New Zealand show that the correlation between inflation and inflation uncertainty has been much weaker since early 1990s, which coincides with the timing of the implementation of inflation targeting.


Dr. Hou is an Assistant Professor in Economics from Center for Economics, Finance and Management Studies, Hunan University. He obtained his Ph.D. degree from Australian National University. His research interest focuses on Bayesian nonparametric modeling, nonlinear state space models and macroeconomic forecasting. His work has been published in well-recognized international journals such as International Journal of Forecasting and Energy Economics.