Sources of Inflation Uncertainty and Real Economic Activity

Abstract This paper examines the effects of inflation uncertainties on real GDP. We argue that different sources of inflation uncertainty have different impacts on real GDP. The empirical evidence points out that uncertainty arising from changing regression coefficients has negative impacts on real GDP. However, the effect of uncertainty due to heteroscedasticity in disturbances on real GDP is insignificant. Moreover, we find that the survey-based measure of inflation uncertainty appears to be more associated with the uncertainty that arises from changing regression coefficients