European Monetary Policy Could Lead to Asymmetric Real Effects
The article explores the connection between inflation and uncertainty about inflation in six European countries from 1960 to 1999. They used specific models to measure inflation uncertainty and tested if inflation causes uncertainty. In most countries, higher inflation leads to more uncertainty, but this doesn't always harm the economy. A common European monetary policy could affect countries differently through inflation uncertainty. The impact of uncertainty on inflation varies among countries: in some, it raises inflation, while in others, it lowers it. These findings align with the rankings of central bank independence.