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Inflation, inflation uncertainty and output growth: what does the data say for Malaysia?


Citation

Baharumshah, Ahmad Zubaidi and Soon, Siew Voon (2014) Inflation, inflation uncertainty and output growth: what does the data say for Malaysia? Journal of Economic Studies, 41 (3). pp. 370-386. ISSN 0144-3585; ESSN: 1758-7387

Abstract

Purpose: The purpose of this paper is to examine the causal relationships between inflation, output growth and their uncertainties in Malaysia.Design/methodology/approach: The modeling approach allows for structural breaks to avoid the masking of specific impacts. Findings: Based on the asymmetric Generalized Autoregressive Conditional Heteroskedasticity model, the paper found strong evidence favoring a positive effect of a change in the inflation uncertainty as predicted by the Friedman-Ball hypothesis. In addition, inflation (inflation uncertainty) has direct (indirect) negative effect on the output growth. The results are consistent with the Taylor effect – increases in inflation uncertainty decreases output uncertainty. The analysis also reveals that economic uncertainty lowers the growth rate of output, complying with Bernanke's idea. Originality/value: The present study suggests that extra efforts are required to locate the breaks in the variance in order to draw concrete evidence on link between economic uncertainty and macroeconomic performance.


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Additional Metadata

Item Type: Article
Divisions: Faculty of Economics and Management
DOI Number: https://doi.org/10.1108/JES-05-2012-0073
Publisher: Emerald Group Publishing Limited
Keywords: Inflation; Inflation uncertainty; Output growth; Structural breaks
Depositing User: Nurul Ainie Mokhtar
Date Deposited: 07 Dec 2015 08:49
Last Modified: 15 Aug 2016 07:31
Altmetrics: http://www.altmetric.com/details.php?domain=psasir.upm.edu.my&doi=10.1108/JES-05-2012-0073
URI: http://psasir.upm.edu.my/id/eprint/34175
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