Conditional Volatility Measures of Inflation Uncertainty: Evidence from the Greek Experience
This paper investigates the dynamics developed in the relationship between output and prices. It examines the case of Greece which is of particular interest since the Greek economy is currently characterized by surrounding inelasticities and rigidities in labour and goods markets. By using a model of conditional volatility the CPI-inflation is decomposed in two components, one expected and one unexpected. It is argued that there is a strong long-run relationship between the unpredicted inflation and total output for the period examined. © 2000 Economic Society of Australia (Queensland) Inc.