The asymmetric effects of inflation, inflationary uncertainty and economic growth in Mexico
DOI:
https://doi.org/10.24275/uam/azc/dcsh/ae/2020v35n90/RosasKeywords:
inflation, inflationary uncertainty, economic growth, asymmetric GARCH modelsAbstract
The impact of inflation and its uncertainty on Mexico's economic growth is explored. In addition, the causal relationship between inflation and its nominal uncertainty is investigated. For this, an asymmetric bivariate GARCH constant conditional correlation (CCC) model is estimated, which allows modeling the inflation uncertainty and the uncertainty output in the period from August 1984 to June 2019. These variables are used to test the feedback effect established by the theory, using Granger causality tests with the Toda-Yamamoto approach. The empirical results show that shocks of bad news have a greater impact on inflation and output uncertainty, when compared to impacts of equal magnitude caused by good news. Compliance with the Friedman-Ball hypothesis, the validity of the Holland hypothesis, as well as the presence of a Tobin effect in the Mexican economy are also verified.
Clasificación JEL: C32; D81; E31; F43.
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References
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Barro, R. J., y D. Gordon, (1983). A Positive Theory of Monetary Policy in a Natural Rate Model. Journal of Political Economy, (91), pp. 589–610. DOI: 10.1086/261167
Barro, R. J. (1995). Inflation and economic growth, NBER Working Paper Series 5326, Washington, D.C.: National Bureau of Economic Research, Inc.
Berndt, E., B. Hall, R. Hall, y J. Hausman, (1974). Estimation and inference in nonlinear structural models, Sanford V. Berg (editor) Annals of Economic and Social Measurement, 3(4), pp. 653 - 665. Recuperado de:<https://www.nber.org/chapters/c10206.pdf>
Bollerslev, T. (1986). Generalized Autoregressive Conditional Heteroskedasticity. Journal of Econometrics, 31(3), pp. 307-327. DOI:https://doi.org/10.1016/0304-4076(86)90063-1
Bollerslev, T. (1990). Modelling the coherence in short-run nominal exchange rates: a multivariate generalized ARCH model. Review of Economics and Statistics, Vol. 72 (3), 498–505. DOI: 10.2307/2109358
Bredin, D. y S. Fountas, (2009). Macroeconomic uncertainty and performance in the European Union. Journal of International Money and Finance, Vol. 28 (6), pp. 972–86. https://doi.org/10.1016/j.jimonfin.2008.09.003
Bredin, D., J. Elder, y S. Fountas, (2009). Macroeconomic uncertainty and performance in Asian countries. Review of Development Economics, Vol. 13(2), pp. 215-229. DOI: https://doi.org/10.1111/j.1467-9361.2009.00508.x
Brooks, C. (2019). Introductory Econometrics for Finance. Cambridge: Cambridge University Press. DOI: 10.1017/9781108524872
Bruno, M., y W. Easterly, (1998). Inflation crisis and long-run growth. Journal of Monetary Economics, Vol. 41 (1), pp. 3–26. https://doi.org/10.1016/S0304-3932(97)00063-9
Chowdhury, K. B., K. Srikanta, y N. Sarkar, (2018). Regime‐Dependent Effects of Uncertainty on Inflation and Output Growth: Evidence from the United Kingdom and the United States. Scottish Journal of Political Economy, Vol. 65(4), pp. 390-413. http://dx.doi.org/10.1111/sjpe.12168
Conrad, C. y M. Karanasos, (2005). On the inflation-uncertainty hypothesis in the USA, Japan and the UK: a dual long memory approach. Japan and the World Economy, Vol. 17 (3), pp. 327-43. https://doi.org/10.1016/j.japwor.2004.03.002
Conrad, C. y M. Karanasos, (2015). On the Transmission of Memory in GARCH‐In‐Mean Models. Journal of Time Series Analysis, Vol. 36(5), pp. 706-720. http://dx.doi.org/10.1111/jtsa.12119
Cukierman, A. y Meltzer, A. (1986). A theory of ambiguity, credibility, and inflation under discretion and asymmetric information. Econometrica, Vol. 54(5), pp. 1099-1128. DOI: 10.2307/1912324
Daal, E., A. Naka. & B. Sanchez, (2005). Re-examining inflation and inflation uncertainty in developed and emerging countries. Economics Letters, 89(2), pp. 180-186. https://doi.org/10.1016/j.econlet.2005.05.024
Dotsey, M. y P. Sarte. (2000). Inflation Uncertainty and Growth in a Cash-in-advance Economy. Journal of Monetary Economics, Vol. 45 (3), pp. 631–655.https://doi.org/10.1016/S0304-3932(00)00005-2
Elder, J. (2004). Another perspective on the effects of inflation uncertainty. Journal of Money. Credit and Banking, Vol. 36 (5), pp. 911–28. DOI:10.1353/mcb.2004.0073
Engle, R.F. (1982). Autoregressive conditional heteroskedasticity with estimates of the variance of United Kingdom inflation. Econometrica, 50(4). pp. 987-1007. DOI: 10.2307/1912773
Engle, R. F. y V. K. Ng, (1993). Measuring and Testing the Impact of News on Volatility. Journal of Finance, Vol. 48 (5), pp. 1749-78. https://doi.org/10.1111/j.15406261.1993.tb05127.x
Fischer, S. (1993). The role of macroeconomic factors in growth. Journal of Monetary Economics, 32 (3), pp. 485–512. https://doi.org/10.1016/0304-3932(93)90027-D
Fountas, S. (2010). Inflation, inflation uncertainty and growth: are they related? Economic Modelling, 27(5), pp. 896-899. DOI: https://doi.org/10.1016/j.econmod.2010.06.001
Fountas, S., A. Ioannidis y M. Karanasos (2004). Inflation, inflation uncertainty and a common European monetary policy, The Manchester School, Vol. 72 (2), pp. 221-242. https://doi.org/10.1111/j.1467-9957.2004.00390.x
Fountas, S. y M. Karanasos, (2007). Inflation, output growth, and nominal and real uncertainty: empirical evidence for the G7. Journal of International Money and Finance, Vol. 26 (2), pp. 229–50. https://doi.org/10.1016/j.jimonfin.2006.10.006
Friedman, M. (1977). Nobel lecture: inflation and unemployment. Journal of Political Economy, vol. 85(3), pp. 451-472. http://dx.doi.org/10.1086/260579
Glosten, L., R. Jagannathan, y D. Runkle, (1993). On the relation between the expected value and the volatility of the normal excess return on stocks, The Journal of Finance 48(5), pp. 1779-1801. https://doi.org/10.1111/j.1540-6261.1993.tb05128.x
Granger, C. W. J. (1969). Investigating causal relations by econometric models and cross-spectral methods. Econometrica, Vol. 37 (3), pp. 424–438.DOI: 10.2307/1912791
Grier K. y R. Grier (1998). Inflación e incertidumbre inflacionaria en México, 1960 – 1997. El Trimestre Económico, Vol. 65(259), pp. 407-426.
Grier, K. y M. J. Perry, (1998). “On inflation and inflation uncertainty in the G7 countries”, Journal of International Money and Finance, 17(4), pp. 671-689. https://doi.org/10.1016/S0261-5606(98)00023-0
Grier, K. B. y M. Perry, (2000). The effects of real and nominal uncertainty on inflation and output growth: some GARCH-M evidence, Journal of Applied Econometrics, Vol. 15(1), pp. 45-58. https://doi.org/10.1002/(SICI)1099-1255(200001/02)15:1<45::AID-JAE542>3.0.CO;2-K
Grier, R. y K. B. Grier, (2006). On the real effects of inflation and inflation uncertainty in México, Journal of Development Economics, Vol. 80(2), pp. 478-500. DOI: https://doi.org/10.1016/j.jdeveco.2005.02.002
Grier, K., O. Henry., N., Olekalns, y K. Shields, (2004). The asymmetric effects of uncertainty on inflation and output growth, Journal of Applied Econometrics vol. 19 (5), pp. 551–565. https://doi.org/10.1002/jae.763
Hartmann, M. y Roestel, J. (2013). Inflation, output and uncertainty in the era of inflation targeting – A multi-economy view on causal linkages, Journal of international money and finance, Vol. 37 (C), pp. 98–112.https://doi.org/10.1016/j.jimonfin.2013.05.011
Holland, A. S. (1995). Inflation and uncertainty: tests for temporal ordering. Journal of Money, Credit and Banking, Vol. 27(3), pp. 827-837. DOI: 10.2307/2077753
Jiranyakul K., y T. P. Opiela, (2011). The Impact of Inflation Uncertainty on Output Growth and Inflation in Thailand. Asian Economic Journal, Vol. 25(3), pp. 291-307. https://doi.org/10.1111/j.1467-8381.2011.02062.x
Mohd S. H., A. Z. Baharumshah, y S. Fountas, (2012). Inflation, Inflation Uncertainty and Output Growth: Recent Evidence from ASEAN-5 Countries. The Singapore Economic Review (SER). Vol. 58(04), pages 1-17.https://doi.org/10.1142/S0217590813500306
Ozdemir, Z. A. (2010). Dynamics of inflation, output growth and their uncertainty in the UK: an empirical analysis. The Manchester School, Vol. 78 (6), pp. 511–37. https://doi.org/10.1111/j.1467-9957.2009.02153.x
Perrotini H. I. y D. Rodríguez, (2012). Inflación, incertidumbre inflacionaria y crecimiento económico en México: 1929-2009, Revista Mexicana de Economía y Finanzas, 7(1), pp. 1-26. DOI: https://doi.org/10.21919/remef.v7i1.23
Pourgerami, A. y K. Maskus, (1987). The effects of inflation on the predictability of Price changes in Latin America: some estimates and policy implications. World Development Vol. 15(2), pp. 287-290. DOI: https://doi.org/10.1016/0305-750X(87)90083-0
Rosas R. E., y T. S. López, (2018). Inflación e incertidumbre inflacionaria: la postura del Banco de México, 1969-2017. Revista Finanzas y Política Económica, 10(2), pp. 349-372. DOI: https://doi.org/10.14718/revfinanzpolitecon.2018.10.2.6
Sidrauski, M. (1967). Rational choice and patterns of growth in a monetary economy. American Economic Review, vol. 57(2), 534–544.https://www.jstor.org/stable/i331577
Stockman, A. C. (1981). Anticipate inflation and the capital stock in cash-in-advance economy, Journal of Monetary Economics, Vol. 8(3), 387–393.https://doi.org/10.1016/0304-3932(81)90018-0
Thornton, J. (2007). The relationship between inflation and inflation uncertainty in emerging market economies. Southern Economic Journal, Vol. 73 (4), 858-870. DOI: 10.2307/20111932
Toda, H.Y. y T. Yamamoto, (1995). Statistical inference in vector autoregressions with possibly integrated process. Journal of Econometrics, Vol. 66 (1-2), pp. 225–250. https://doi.org/10.1016/0304-4076(94)01616-8
Tobin, J. (1965). Money and economic growth. Econometrica, Vol. 33(4), 671–684.DOI: 10.2307/1910352
Ungar, M., & B. Zilberfarb, (1993). Inflation and its Unpredictability –Theory and Empirical Evidence. Journal of Money, Credit, and Banking, vol. 25(4), pp. 709-720. DOI: 10.2307/2077800
Vogelsang, T. J. and P. Perron, (1998). Additional Tests for a Unit Root Allowing for a Break in the Trend at an Unknown Time, International Economic Review, 39(4), pp. 1073-1100. DOI: 10.2307/2527353
Wilson, B. K. (2006). The Links between Inflation, Inflation Uncertainty and Output Growth: New Time Series Evidence from Japan. Journal of Macroeconomics 28(3), pp. 609-620. DOI: https://doi.org/10.1016/j.jmacro.2004.11.004
Barro, R. J., y D. Gordon, (1983). A Positive Theory of Monetary Policy in a Natural Rate Model. Journal of Political Economy, (91), pp. 589–610. DOI: 10.1086/261167
Barro, R. J. (1995). Inflation and economic growth, NBER Working Paper Series 5326, Washington, D.C.: National Bureau of Economic Research, Inc.
Berndt, E., B. Hall, R. Hall, y J. Hausman, (1974). Estimation and inference in nonlinear structural models, Sanford V. Berg (editor) Annals of Economic and Social Measurement, 3(4), pp. 653 - 665. Recuperado de:<https://www.nber.org/chapters/c10206.pdf>
Bollerslev, T. (1986). Generalized Autoregressive Conditional Heteroskedasticity. Journal of Econometrics, 31(3), pp. 307-327. DOI:https://doi.org/10.1016/0304-4076(86)90063-1
Bollerslev, T. (1990). Modelling the coherence in short-run nominal exchange rates: a multivariate generalized ARCH model. Review of Economics and Statistics, Vol. 72 (3), 498–505. DOI: 10.2307/2109358
Bredin, D. y S. Fountas, (2009). Macroeconomic uncertainty and performance in the European Union. Journal of International Money and Finance, Vol. 28 (6), pp. 972–86. https://doi.org/10.1016/j.jimonfin.2008.09.003
Bredin, D., J. Elder, y S. Fountas, (2009). Macroeconomic uncertainty and performance in Asian countries. Review of Development Economics, Vol. 13(2), pp. 215-229. DOI: https://doi.org/10.1111/j.1467-9361.2009.00508.x
Brooks, C. (2019). Introductory Econometrics for Finance. Cambridge: Cambridge University Press. DOI: 10.1017/9781108524872
Bruno, M., y W. Easterly, (1998). Inflation crisis and long-run growth. Journal of Monetary Economics, Vol. 41 (1), pp. 3–26. https://doi.org/10.1016/S0304-3932(97)00063-9
Chowdhury, K. B., K. Srikanta, y N. Sarkar, (2018). Regime‐Dependent Effects of Uncertainty on Inflation and Output Growth: Evidence from the United Kingdom and the United States. Scottish Journal of Political Economy, Vol. 65(4), pp. 390-413. http://dx.doi.org/10.1111/sjpe.12168
Conrad, C. y M. Karanasos, (2005). On the inflation-uncertainty hypothesis in the USA, Japan and the UK: a dual long memory approach. Japan and the World Economy, Vol. 17 (3), pp. 327-43. https://doi.org/10.1016/j.japwor.2004.03.002
Conrad, C. y M. Karanasos, (2015). On the Transmission of Memory in GARCH‐In‐Mean Models. Journal of Time Series Analysis, Vol. 36(5), pp. 706-720. http://dx.doi.org/10.1111/jtsa.12119
Cukierman, A. y Meltzer, A. (1986). A theory of ambiguity, credibility, and inflation under discretion and asymmetric information. Econometrica, Vol. 54(5), pp. 1099-1128. DOI: 10.2307/1912324
Daal, E., A. Naka. & B. Sanchez, (2005). Re-examining inflation and inflation uncertainty in developed and emerging countries. Economics Letters, 89(2), pp. 180-186. https://doi.org/10.1016/j.econlet.2005.05.024
Dotsey, M. y P. Sarte. (2000). Inflation Uncertainty and Growth in a Cash-in-advance Economy. Journal of Monetary Economics, Vol. 45 (3), pp. 631–655.https://doi.org/10.1016/S0304-3932(00)00005-2
Elder, J. (2004). Another perspective on the effects of inflation uncertainty. Journal of Money. Credit and Banking, Vol. 36 (5), pp. 911–28. DOI:10.1353/mcb.2004.0073
Engle, R.F. (1982). Autoregressive conditional heteroskedasticity with estimates of the variance of United Kingdom inflation. Econometrica, 50(4). pp. 987-1007. DOI: 10.2307/1912773
Engle, R. F. y V. K. Ng, (1993). Measuring and Testing the Impact of News on Volatility. Journal of Finance, Vol. 48 (5), pp. 1749-78. https://doi.org/10.1111/j.15406261.1993.tb05127.x
Fischer, S. (1993). The role of macroeconomic factors in growth. Journal of Monetary Economics, 32 (3), pp. 485–512. https://doi.org/10.1016/0304-3932(93)90027-D
Fountas, S. (2010). Inflation, inflation uncertainty and growth: are they related? Economic Modelling, 27(5), pp. 896-899. DOI: https://doi.org/10.1016/j.econmod.2010.06.001
Fountas, S., A. Ioannidis y M. Karanasos (2004). Inflation, inflation uncertainty and a common European monetary policy, The Manchester School, Vol. 72 (2), pp. 221-242. https://doi.org/10.1111/j.1467-9957.2004.00390.x
Fountas, S. y M. Karanasos, (2007). Inflation, output growth, and nominal and real uncertainty: empirical evidence for the G7. Journal of International Money and Finance, Vol. 26 (2), pp. 229–50. https://doi.org/10.1016/j.jimonfin.2006.10.006
Friedman, M. (1977). Nobel lecture: inflation and unemployment. Journal of Political Economy, vol. 85(3), pp. 451-472. http://dx.doi.org/10.1086/260579
Glosten, L., R. Jagannathan, y D. Runkle, (1993). On the relation between the expected value and the volatility of the normal excess return on stocks, The Journal of Finance 48(5), pp. 1779-1801. https://doi.org/10.1111/j.1540-6261.1993.tb05128.x
Granger, C. W. J. (1969). Investigating causal relations by econometric models and cross-spectral methods. Econometrica, Vol. 37 (3), pp. 424–438.DOI: 10.2307/1912791
Grier K. y R. Grier (1998). Inflación e incertidumbre inflacionaria en México, 1960 – 1997. El Trimestre Económico, Vol. 65(259), pp. 407-426.
Grier, K. y M. J. Perry, (1998). “On inflation and inflation uncertainty in the G7 countries”, Journal of International Money and Finance, 17(4), pp. 671-689. https://doi.org/10.1016/S0261-5606(98)00023-0
Grier, K. B. y M. Perry, (2000). The effects of real and nominal uncertainty on inflation and output growth: some GARCH-M evidence, Journal of Applied Econometrics, Vol. 15(1), pp. 45-58. https://doi.org/10.1002/(SICI)1099-1255(200001/02)15:1<45::AID-JAE542>3.0.CO;2-K
Grier, R. y K. B. Grier, (2006). On the real effects of inflation and inflation uncertainty in México, Journal of Development Economics, Vol. 80(2), pp. 478-500. DOI: https://doi.org/10.1016/j.jdeveco.2005.02.002
Grier, K., O. Henry., N., Olekalns, y K. Shields, (2004). The asymmetric effects of uncertainty on inflation and output growth, Journal of Applied Econometrics vol. 19 (5), pp. 551–565. https://doi.org/10.1002/jae.763
Hartmann, M. y Roestel, J. (2013). Inflation, output and uncertainty in the era of inflation targeting – A multi-economy view on causal linkages, Journal of international money and finance, Vol. 37 (C), pp. 98–112.https://doi.org/10.1016/j.jimonfin.2013.05.011
Holland, A. S. (1995). Inflation and uncertainty: tests for temporal ordering. Journal of Money, Credit and Banking, Vol. 27(3), pp. 827-837. DOI: 10.2307/2077753
Jiranyakul K., y T. P. Opiela, (2011). The Impact of Inflation Uncertainty on Output Growth and Inflation in Thailand. Asian Economic Journal, Vol. 25(3), pp. 291-307. https://doi.org/10.1111/j.1467-8381.2011.02062.x
Mohd S. H., A. Z. Baharumshah, y S. Fountas, (2012). Inflation, Inflation Uncertainty and Output Growth: Recent Evidence from ASEAN-5 Countries. The Singapore Economic Review (SER). Vol. 58(04), pages 1-17.https://doi.org/10.1142/S0217590813500306
Ozdemir, Z. A. (2010). Dynamics of inflation, output growth and their uncertainty in the UK: an empirical analysis. The Manchester School, Vol. 78 (6), pp. 511–37. https://doi.org/10.1111/j.1467-9957.2009.02153.x
Perrotini H. I. y D. Rodríguez, (2012). Inflación, incertidumbre inflacionaria y crecimiento económico en México: 1929-2009, Revista Mexicana de Economía y Finanzas, 7(1), pp. 1-26. DOI: https://doi.org/10.21919/remef.v7i1.23
Pourgerami, A. y K. Maskus, (1987). The effects of inflation on the predictability of Price changes in Latin America: some estimates and policy implications. World Development Vol. 15(2), pp. 287-290. DOI: https://doi.org/10.1016/0305-750X(87)90083-0
Rosas R. E., y T. S. López, (2018). Inflación e incertidumbre inflacionaria: la postura del Banco de México, 1969-2017. Revista Finanzas y Política Económica, 10(2), pp. 349-372. DOI: https://doi.org/10.14718/revfinanzpolitecon.2018.10.2.6
Sidrauski, M. (1967). Rational choice and patterns of growth in a monetary economy. American Economic Review, vol. 57(2), 534–544.https://www.jstor.org/stable/i331577
Stockman, A. C. (1981). Anticipate inflation and the capital stock in cash-in-advance economy, Journal of Monetary Economics, Vol. 8(3), 387–393.https://doi.org/10.1016/0304-3932(81)90018-0
Thornton, J. (2007). The relationship between inflation and inflation uncertainty in emerging market economies. Southern Economic Journal, Vol. 73 (4), 858-870. DOI: 10.2307/20111932
Toda, H.Y. y T. Yamamoto, (1995). Statistical inference in vector autoregressions with possibly integrated process. Journal of Econometrics, Vol. 66 (1-2), pp. 225–250. https://doi.org/10.1016/0304-4076(94)01616-8
Tobin, J. (1965). Money and economic growth. Econometrica, Vol. 33(4), 671–684.DOI: 10.2307/1910352
Ungar, M., & B. Zilberfarb, (1993). Inflation and its Unpredictability –Theory and Empirical Evidence. Journal of Money, Credit, and Banking, vol. 25(4), pp. 709-720. DOI: 10.2307/2077800
Vogelsang, T. J. and P. Perron, (1998). Additional Tests for a Unit Root Allowing for a Break in the Trend at an Unknown Time, International Economic Review, 39(4), pp. 1073-1100. DOI: 10.2307/2527353
Wilson, B. K. (2006). The Links between Inflation, Inflation Uncertainty and Output Growth: New Time Series Evidence from Japan. Journal of Macroeconomics 28(3), pp. 609-620. DOI: https://doi.org/10.1016/j.jmacro.2004.11.004
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2020-09-04
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The asymmetric effects of inflation, inflationary uncertainty and economic growth in Mexico. (2020). Análisis Económico, 35(90), 45-66. https://doi.org/10.24275/uam/azc/dcsh/ae/2020v35n90/Rosas
