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Uncertainty shocks and inflation dynamics in the U.S

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  • Haque, Qazi
  • Magnusson, Leandro M.

Abstract

We estimate a time-varying parameter VAR (TVP-VAR) with stochastic volatility using U.S. data to study the effects of uncertainty shocks on inflation. We find the response of inflation to be negative in the post-WWII period. Our findings suggest that uncertainty shocks propagate like aggregate demand shocks and not like aggregate supply shocks.

Suggested Citation

  • Haque, Qazi & Magnusson, Leandro M., 2021. "Uncertainty shocks and inflation dynamics in the U.S," Economics Letters, Elsevier, vol. 202(C).
    • Handle: RePEc:eee:ecolet:v:202:y:2021:i:c:s0165176521001026
    DOI: 10.1016/j.econlet.2021.109825
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    Full references (including those not matched with items on IDEAS)

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Research Review | 27 November 2020 | Inflation
      by James Picerno in The Capital Spectator on 2020-11-27 05:02:31

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    More about this item

    Keywords

    Uncertainty shocks; Inflation dynamics; TVP-VARs with stochastic volatility;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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