Inflation Uncertainty in Chile: Asymmetries and the News Impact Curve
AbstractThis article presents a historical analysis of inflation in Chile from 1933 to 2001, estimating generalized autoregressive heteroskedasticity models, including asymmetric extensions such as the Threshold, Quadratic and Box-Cox models. Traditional symmetric models accept the Friedman hypothesis establishing that inflation increases uncertainty. However, a more general class of asymmetric models rejects this hypothesis. This result is not valid for the asymmetric Box-Cox non linear model. Furthermore, we found that high levels of uncertainty in inflation increase the level of inflation with some lags, not rejecting the positive correlation established by Cukierman and Metzler. The News Impact Curve reflects those asymmetries.
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