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Is the relationship between inflation and its volatility asymmetric? US evidence, 1800–2016

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  • Karras, Georgios

Abstract

This paper investigates the relationship between inflation and inflation volatility. Using annual data from 1800 to 2016, the results show that US inflation and its volatility have been positively correlated when inflation exceeds a certain value, but negatively correlated when inflation is below this threshold. The evidence also suggests that the break in the relationship occurs between annual inflation rates of 0.8% and 4.3%, which includes both the 2% inflation target of many central banks and the 3.5% break point predicted by the New Keynesian model of Coibion, Gorodnichenko, and Wieland (2012).

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  • Karras, Georgios, 2017. "Is the relationship between inflation and its volatility asymmetric? US evidence, 1800–2016," The Journal of Economic Asymmetries, Elsevier, vol. 16(C), pages 79-86.
    • Handle: RePEc:eee:joecas:v:16:y:2017:i:c:p:79-86
    DOI: 10.1016/j.jeca.2017.08.002
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    1. Georgios Karras, 2015. "Low Inflation vs. Stable Inflation: Evidence from the UK, 1688–2009," Scottish Journal of Political Economy, Scottish Economic Society, vol. 62(5), pages 505-517, November.
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    Cited by:

    1. Neil Lawton & Liam A. Gallagher, 2020. "The negative side of inflation targeting: revisiting inflation uncertainty in the EMU," Applied Economics, Taylor & Francis Journals, vol. 52(29), pages 3186-3203, June.
    2. Alogoskoufis, George & Malliaris, A.G. & Stengos, Thanasis, 2023. "The scope and methodology of economic and financial asymmetries," The Journal of Economic Asymmetries, Elsevier, vol. 27(C).

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    More about this item

    Keywords

    Inflation; Inflation volatility; Trend inflation;
    All these keywords.

    JEL classification:

    • 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

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