Does Inflation Affect Output Varibility? Evidence from 40 Years of US Data

The paper investigates whether it is the level of inflation, changes in the inflation rate or unanticipated inflation which influence the variability of sectoral output growth rate, using the U.S. monthly industrial data from 1957 to 1997. We experiment a range of specifications - our main findign is there is no systematic relationship between inflation and sectorial growth. The effective exchange rate and the real oil price do help to explain some of the dispersion in output growth rates.