Menu Expand
  1. Journals
  2. Economics, Finance, Business & Management
  3. Credit and Capital Markets – Kredit und Kapital
  4. Vol. 18, Issue 2
  5. pp. 230–239

JOURNAL ARTICLE

Cite JOURNAL ARTICLE

Style
Darrat, A. Inflationary Surprises and Real Economic Activity in Germany: Some Tests Based on ‘Efficient Market’ Expectations. Credit and Capital Markets – Kredit und Kapital, 18(2), 230-239. https://doi.org/10.3790/ccm.18.2.230
Darrat, Ali F. "Inflationary Surprises and Real Economic Activity in Germany: Some Tests Based on ‘Efficient Market’ Expectations" Credit and Capital Markets – Kredit und Kapital 18.2, 1985, 230-239. https://doi.org/10.3790/ccm.18.2.230
Darrat, Ali F. (1985): Inflationary Surprises and Real Economic Activity in Germany: Some Tests Based on ‘Efficient Market’ Expectations, in: Credit and Capital Markets – Kredit und Kapital, vol. 18, iss. 2, 230-239, [online] https://doi.org/10.3790/ccm.18.2.230
Format
Download

Inflationary Surprises and Real Economic Activity in Germany: Some Tests Based on ‘Efficient Market’ Expectations

Darrat, Ali F.

Credit and Capital Markets – Kredit und Kapital, Vol. 18 (1985), Iss. 2 : pp. 230–239

Read Now Download (PDF)

Additional Information

Article Details

Publisher Name
Duncker & Humblot
DOI
https://doi.org/10.3790/ccm.18.2.230
Language
Multiple languages
Pages
10

Author Details

Ali F. Darrat, New Orleans

References

  1. Amihud, Y. (1982): “Unanticipated Inflation and Economic Activity.” Economics Letters 9: 327 – 335.  Google Scholar
  2. Arak, M. (1977): “Some International Evidence on Output- Inflation Trade-offs: Comment.” American Economic Review 67: 728 – 730.  Google Scholar
  3. Barro, R. J. (1977): “Unanticipated Money Growth and Unemployment in the United States.” American Economic Review 67: 101-115.  Google Scholar
  4. Barro, R. J. (1978): “Unanticipated Money, Output and the Price Level in the United States.” Journal of Political Economy 86: 549 – 580.  Google Scholar
  5. Blinder, A. S. (1981): “Inventories and the Structure of Macro Models.” American Economic Review, Papers and Proceedings 71: 11 – 16.  Google Scholar
  6. Fair, R. C. (1979): “An Analysis of the Accuracy of Four Macroeconomic Models.” Journal of Political Economy 87: 701 – 718.  Google Scholar
  7. Fama, E. F. (1975): “Short-Term Interest Rates as Predictors of Inflation.” American Economic Review 65: 269 – 282.  Google Scholar
  8. Fama, E. F. and G. W. Schwert (1979): “Inflation, Interest, and Relative Prices.” Journal of Business 52: 183 – 209.  Google Scholar
  9. Fitzgerald, M. D. and G. Pollio (1982): “On the Neutrality of Fiscal Policy.” European Economic Review 17: 87 – 98.  Google Scholar
  10. Fitzgerald, M.D. and G. Pollio (1983): “Money, Activity and Prices.” European Economic Review 23: 299 – 314.  Google Scholar
  11. Hoffman, D. L. and D. E. Schlagenhauf (1982): “An Econometric Investigation of the Monetary Neutrality and Rationality Propositions from an International Perspective.” Review of Economics and Statistics 64: 562 – 571.  Google Scholar
  12. Lucas, R. E., Jr. (1973): “Some International Evidence on Output-Inflation Tradeoffs.” American Economic Review 63: 326 – 334.  Google Scholar
  13. Makin, J. H. (1982): “Anticipated Money, Inflation Uncertainty and Real Economic Activity.” Review of Economics and Statistics 64: 126 -134.  Google Scholar
  14. Mishkin, F. S. (1981): “The Real Interest Rate: An Empirical Investigation.” Journal of Monetary Economics (Supplement) Carnegie-Rochester Conference Series in Public Policy, 15: 151 – 200.  Google Scholar
  15. Mishkin, F. S. (1982 a): “Does Anticipated Monetary Policy Matter? An Econometric Investigation.” Journal of Political Economy 90: 22 -51.  Google Scholar
  16. Mishkin, F. S. (1982b): “Does Anticipated Aggregate Demand Policy Matter? Further Econometric Results.” American Economic Review 72: 788 – 802.  Google Scholar
  17. Schmidt, P.andR.N. Waud (1973): “The Almon Lag Technique and the Monetary Versus Fiscal Policy Debate.” Journal of American Statistical Association 68: 11 – 19.  Google Scholar
  18. Sheehey, E. J. (1984): “The Neutrality of Money in the Short-Run: Some Tests.” Journal of Money, Credit and Banking 16: 237 – 241.  Google Scholar
  19. Singleton, K. J. (1981): “Extracting Measures of Ex-ante Real Interest Rates from Ex-post Rates: A Comment on the Mishkin Paper.” Journal of Monetary Economics (Supplement). Carnegie Rochester Conference Serie in Public Policy, Volume 15: 201 – 212.  Google Scholar
  20. Small, D. H. (1979): “Unanticipated Money Growth and Unemployment in the United States: Comment.” American Economic Review 69: 996 – 1003.  Google Scholar

Abstract

Inflationary Surprises and Real Economic Activity in West Germany: Some Tests Based on “Efficient Market” Expectations

This inquiry addresses the empirical validity of the Expectations-Adjusted Supply Function hypothesis (EASF) in the case of West Germany. As is well known, this hypothesis contends that only the unanticipated (surpise) component of inflation can be transmitted to the real side of the economy. Since systematic stabilization policies can work only if systematic (anticipated) inflation affects real economic activity, the EASF hypothesis implies that such policies are impotent. Drawing on Fama’s proposition that short-term interest rates provide efficient estimates of anticipated inflation, actual inflation in West Germany over the period 1960:1 – 1983:3 are decomposed into anticipated and unanticipated elements. These inflation measures are then used to test the validity of the EASF hypothesis. The empirical results strongly support the hypothesis in that only unanticipated inflation exerts a significant negative impact upon unemployment. For West Germany, such results therefore cast doubts on the usefulness of systematic stabilization policies.

Table of Contents

Section Title Page Action Price
Ali F. Darrat: Inflationary Surprises and Real Economic\rActivity in Germany: Some Tests Based on\r'Efficient Market' Expectations 230
I. Introduction 230
II. Efficient Market Estimates of Anticipated Inflation 231
III. The EASF Test Results 234
IV. Concluding Remarks 236
References 237
Zusammenfassung: Inflationäre Überraschungen und reale Wirtschaftsaktivität in Westdeutschland: Einige Tests auf der Grundlage von Erwartungen „effizienter Märkte 237
Summary: Inflationary Surprises and Real Economic Activity in West Germany: Some Tests Based on \"Efficient Market\" Expectations 238
Résumé: Surprises inflationnistes et activités économiques réelles en République fédérale d'Allemagne: quelques analyses basées sur des attentes de «marché efficient» 238

Contact

Duncker & Humblot GmbH Carl-Heinrich-Becker-Weg 9 12165 Berlin, Deutschland T: +49 30 790006-0

Quick Navigation

2024 Duncker & Humblot GmbH

Powered by CloudPublish

We use cookies to ensure that you get the best experience on our website. Learn more about how we use cookies.