Macroeconomic uncertainty, growth and inflation in the Eurozone: a causal approach

ABSTRACT

In this article, we evaluate the causal relationship between macroeconomic uncertainty indices, inflation and growth rate for 17 Eurozone countries on a county-level examination. In performing a series of linear and nonlinear causality tests, we find little evidence of a causal relationship between uncertainty and macroeconomic variables. Thus, macroeconomic analysis based on uncertainty indices should be treated with caution.

KEYWORDS:

• Output growth
• inflation
• uncertainty
• causality

JEL CLASSIFICATION:

• C32
• E23
• E27
• E31
• E37

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ All tests evaluate the null hypothesis that no causal relationship exists between the variables under examination.