This paper analyzes how the different types of inflation uncertainty affect a set of interest rate spreads for the UK. Three types of inflation uncertainty—structural uncertainty, impulse uncertainty, and steady-state inflation uncertainty—are defined and derived by using a time-varying...

After two types of inflation uncertainty are derived within a time-varying parameter model with GARCH specification, the relationship between inflation uncertainty and interest rates for safe assets is investigated. The results support the existence of a “flight to quality” effect.