Inflation fuels uncertainty in Asian economies, raising real cost concerns.
The study looked at how inflation affects inflation uncertainty in nine Asian countries. They used a special model and quantile regression to analyze data from 1979 to 2019. The results showed that higher inflation leads to more uncertainty about future inflation in all countries, whether they target inflation or not. This supports the Friedman-Ball hypothesis. Also, uncertainty about inflation tends to increase inflation in most countries, suggesting support for the Cukierman-Meltzer hypothesis. This means that inflation can have real costs for these Asian economies.