Uncertain Effects of Money and the Link between the Inflation Rate and Inflation Uncertainty.

In the postwar period, high rates of inflation are associated with high levels of inflation uncertainty. In this paper, the author argues that the inflation rate and inflation uncertainty are linked by forecasters' uncertainty about the impact of money growth on the price level, and he presents evidence indicating that this has been the case. As long as the impact of money growth on the price level remains unpredictable, then even predictable money growth will cause inflation uncertainty with its accompanying adverse effects on employment and output. Copyright 1993 by Oxford University Press.