English, Article edition: Inflation and inflation uncertainty: evidence from the Caribbean region James E. Payne

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Physical Description
  • article
Language
  • English

Edition details

Title
  • Inflation and inflation uncertainty: evidence from the Caribbean region
Author
  • James E. Payne
Physical Description
  • article
Notes
  • Purpose – The purpose of this paper is to extend the literature on the relationship between inflation and inflation uncertainty by examining three Caribbean countries: the Bahamas, Barbados, and Jamaica. Design/​methodology/​approach – ARMA-GARCH models are used to estimate inflation uncertainty along with Granger-causality tests to infer the relationship between inflation and inflation uncertainty. Findings – The results reveal that both the Bahamas and Jamaica exhibit a high degree of volatility persistence in response to inflationary shocks, while Barbados has a much lower persistence measure. Granger-causality tests indicate that an increase in inflation has been a positive impact on inflation uncertainty for each country. However, an increase in inflation uncertainty yields a decrease in inflation in the case of Jamaica. In summary, the results for the Bahamas and Barbados support the Friedman-Ball hypothesis, whereas the results for Jamaica support Holland's stabilization-motive hypothesis. Research limitations/​implications – Future research on inflation and inflation uncertainty can be extended to incorporate possible regime shifts associated with fiscal and monetary policy. Originality/​value – The study fills a void in the literature with respect to the inflation-inflation uncertainty nexus for Caribbean countries. The results of the paper may be useful to policymakers in the formulation of fiscal and monetary policy.
  • Caribbean, Inflation, Uncertainty management
  • RePEc:eme:jespps:v:35:y:2008:i:6:p:501-511
Language
  • English
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