Are Higher Levels of Inflation Less Predictable? A State-Dependent Conditional Heteroscedasticity Approach

@article{Brunner1990AreHL,
  title={Are Higher Levels of Inflation Less Predictable? A State-Dependent Conditional Heteroscedasticity Approach},
  author={Allan D. Brunner and Gregory D. Hess},
  journal={Journal of Business & Economic Statistics},
  year={1990},
  volume={11},
  pages={187-197}
}
Milton Friedman proposed that there is a positive relationship between inflation and uncertainty about the future path of inflation. In contrast to previous studies of this hypothesis, we find strong statistical evidence that higher levels of inflation are less predictable, although innovations in inflation are somewhat better predictors of future volatility than the actual level of inflation. We argue that previous failures to find an inflation-uncertainty relationship are due to two factors… Expand
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