Cross-sectional evidence on the relation between monetary policy, macroeconomic conditions and low-frequency inflation uncertainty

Christian Conrad; Matthias Hartmann

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.

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Year of publication:	October 16, 2014
Authors:	Conrad, Christian ; Hartmann, Matthias
Publisher:	Heidelberg : Univ., Dep. of Economics Heidelberg : Universitätsbibliothek der Universität Heidelberg
Subject:	Inﬂation uncertainty \| Central banking \| Spline-GARCH \| Geldpolitik \| Monetary policy \| Inflation \| Risiko \| Risk \| Theorie \| Theory \| Zentralbank \| Central bank