In this paper, we propose an analytical framework to explore the level and volatility effects of inflation on the output gap. Using quarterly US data over 1977:q2-2009:q4, we then examine the empirical implications of the model by implementing an instrumental variables Markov regime switching...

We empirically investigate the effects of inflation uncertainty on output growth for the US between 1960 and 2012. Modeling output dynamics within a Markov regime switching framework, we provide evidence that inflation uncertainty exerts a negative and regime dependent impact on output growth. A...