The Euro and inflation uncertainty in the European Monetary Union

Caporale, G.M. and Kontonikas, A. (2009) The Euro and inflation uncertainty in the European Monetary Union. Journal of International Money and Finance, 28(6), pp. 954-971. (doi:10.1016/j.jimonfin.2008.09.004)

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Abstract

This paper adopts a time-varying GARCH framework to estimate short-run and steady-state inflation uncertainty in 12 EMU countries, and then investigates their relationship with inflation. The effects of the Euro introduction in 1999 are examined by utilising a dummy variable. Tests for endogenously determined breaks are also employed. We find a considerable degree of heterogeneity across EMU countries in terms of average inflation, its degree of persistence, and both types of uncertainty, whilst the trend component of inflation is generally decreasing. Various breaks in the relationship between inflation and inflation uncertainty are found, frequently well before the Euro introduction.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Kontonikas, Professor Alexandros
Authors: Caporale, G.M., and Kontonikas, A.
Subjects:H Social Sciences > HG Finance
H Social Sciences > HB Economic Theory
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Journal of International Money and Finance
ISSN:0261-5606
ISSN (Online):1873-0639
Published Online:14 October 2008

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