SFB 303 Discussion Paper No. B-184

Author: Schmidt, Roland
Title: Is Inflation Risk Associated With the Rate of Inflation - New Evidence for Cointegrated Times Series
Abstract: We investigate the role of the inflation level for inflation risk. The inflation process we describe by an error-correction model because the price level is cointegrated with the money stock, industrial production and the interest rate. The resulting inflation risk has a moving average representation which fits the data more appropriately than the ARCH model. Inflation risk is found to be positively related to the inflation rate.
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Creation-Date: May 1991
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