Does Inflation Uncertainty Vary with the Level of Inflation?

The purpose ot this study is to test the hypothesis that inflation uncertainty increases at higher levels of inflation. Our analysis is based on the generalized autoregressive conditional heteroscedasticity class of models, which allow the conditional variance of the error term to be time-varying. Since this variance is a proxy for inflation uncertainty, a positive relationship between the conditional variance and inflation would be interpreted as evidence that inflation uncertainty increases with the level of inflation.