Patterns of Inflation Rates and Inflation Uncertainty in Quantile Regression

In contrast to conventional conditional mean approaches, this study uses quantile regression techniques to present some new statistical evidence on the link between inflation uncertainty and the level of inflation with cross sectional data in 161 countries for period from 1961-2002. We find new evidence that suggests positive inflation shocks have stronger impacts on inflation uncertainty across different quantiles of regression function. The findings suggest that inflation causes inflation uncertainty for sample countries, while inflation uncertainty causes inflation, too. Furthermore, empirical results indicate that increased uncertainty raises inflation, and increased inflation raises inflation uncertainty.