UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY THE HAGUE VIETNAM THE NETHERLANDS VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS THE RELATIONSHIP BETWEEN INFLATION AND INFLATION UNCERTAINTY IN VIETNAM OVER THE PERIOD 1995-2010 BY NGUYỄN VĂN DŨNG MASTER OF ARTS IN DEVELOPMENT ECONOMICS HO CHI MINH CITY, NOVEMBER, 2011 UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY THE HAGUE VIETNAM THE NETHERLANDS VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS THE RELATIONSHIP BETWEEN INFLATION AND INFLATION UNCERTAINTY IN VIETNAM OVER THE PERIOD 1995-2010 A thesis submitted in partial fulfilment of the requirements for the degree of MASTER OF ARTS IN DEVELOPMENT ECONOMICS By NGUYỄN VĂN DŨNG Academic Supervisor: DR TỪ VĂN BÌNH HO CHI MINH CITY, NOVEMBER, 2011 TABLE OF CONTENTS List of Tables iv List of Figures iv List of Acronyms v Acknowledgement vi Abstract vii Chapter 1: Introduction 1.1 Background of the Study 1.2 Problem Statement 1.3 Research Objectives 1.4 Research Questions 1.5 Research Hypotheses 1.6 Justification of the Study 1.7 Scope of the Study 1.8 Organization of the Study Chapter 2: Literature Review 2.1 Inflation Uncertainty 2.2 Theories about the inflation-inflation uncertainty relationship 2.3 Approaches to estimate inflation uncertainty 2.4 Methods to test the causal relationship between inflation and inflation uncertainty 12 2.5 Empirical studies about the inflation-inflation uncertainty relationship 13 2.6 Conceptual Framework 24 2.7 Chapter Summary 26 Chapter 3: Research Methodology and Data 27 3.1 Research Methodology 27 3.1.1 Descriptive statistics 27 3.1.2 Unit root testing 27 3.1.3 Diagnostic tests for serial correlation, heteroskedasticity and ARCH effects 29 ii 3.1.4 Measuring inflation uncertainty 30 3.1.5 Granger causality tests 31 3.1.6 Analytical Framework 32 3.2 Data 33 3.3 Chapter Summary 33 Chapter 4: Findings and Discussion 34 4.1 Descriptive statistics 34 4.2 Unit root testing 35 4.3 OLS estimation of AR(p) model of inflation 36 4.4 Measuring inflation uncertainty 39 4.5 Granger causality tests 46 4.6 Comparison with previous studies 48 4.7 Chapter Summary 49 Chapter 5: Conclusion and Policy Implications 51 5.1 Conclusion 51 5.2 Policy Implications 51 5.3 Limitation and Further Studies 55 5.3.1 Limitation 55 5.3.2 Further Studies 55 References 57 iii List of Tables Table 2.1: Early empirical studies about the inflation-inflation uncertainty relationship 19 Table 2.2: Empirical studies about the inflation-inflation uncertainty relationship using the simultaneous estimation approach 20 Table 2.3: Empirical studies about the inflation-inflation uncertainty relationship using the two-step approach with symmetric GARCH models to estimate inflation uncertainty 21 Table 2.4: Empirical studies about the inflation-inflation uncertainty relationship using the two-step approach with the extensions of GARCH model to capture the asymmetric inflation uncertainty 22 Table 4.1: Unit root tests 35 Table 4.2: Lag selection of AR(p) process 36 Table 4.3: OLS estimation of AR(13) model 37 Table 4.4: AR(13)-(GARCH(1,1), TARCH(1,1), PARCH(1,1), EGARCH(1,1)) models 39 Table 4.5: Granger Causality Tests 46 List of Figures Figure 4.1: Descriptive statistics of inflation in Vietnam 1995-2010 34 Figure 4.2: Average rates of inflation by month in the period 1995-2010 (%) 34 Figure 4.3: Inflation uncertainty of the AR(13)-EGARCH(1,1) model 45 Figure 4.4: Inflation and inflation uncertainty over the period 1995-2010 46 iv List of Acronyms AIC: Akaike Information Criterion AR: Autoregressive ARCH: Autoregressive Conditional Heteroskedasticity EGARCH: Exponential Generalized Autoregressive Conditional Heteroskedasticity GARCH: Generalized Autoregressive Conditional Heteroskedasticity HQ: Hannan-Quinn criterion OLS: Ordinary least squares PARCH: Power Autoregressive Conditional Heteroskedasticity SBV: State Bank of Vietnam SC: Schwartz criterion TARCH: Threshold Autoregressive Conditional Heteroskedasticity UK: the United Kingdom US: the United States of America v Acknowledgement I would like to express my sincere gratitude to my supervisor Dr Tu Van Binh who gave me valuable guidelines, comments, suggestions, and inspiration for the successful completion of this study Besides, his friendly and inspiring approach has given me a great deal of encouragements to overcome difficulties in the whole research process I am also thankful to all lecturers and program administrators in the Vietnam – The Netherlands Program for M.A in Development Economics They gave me wonderful knowledge and help me kindly during the course Last but not least, I would like to express my appreciation to my family, my friends who have given me a lot of support when I pursue my studies at the program vi Abstract The study investigates the causal relationship between inflation and inflation uncertainty in Vietnam over the period 1995-2010 using the two-step procedure Inflation uncertainty is modeled by both symmetric model (GARCH(1,1)) and asymmetric models (TARCH(1,1), PARCH(1,1), EGARCH(1,1)) The results indicate that there exists an asymmetric impact of inflation shocks on inflation uncertainty, implying that a positive inflation shock induces higher inflation uncertainty, while a negative inflation shock induces lower inflation uncertainty Based on information criteria including AIC, SC, and HQ as well as diagnostic tests, AR(13)-EGARCH(1,1) is considered the best model to model inflation uncertainty Then Granger causality tests are employed to test the causality between inflation and inflation uncertainty (estimated by the AR(13)-EGARCH(1,1) model) The results support that a rise in inflation significantly leads to more inflation uncertainty, which confirms the Friedman-Ball hypothesis; and increasing inflation uncertainty leads to more inflation, confirming the Cukierman-Meltzer hypothesis, which indicates an “opportunistic” State Bank of Vietnam The policy implication is that the monetary authorities have to keep inflation low, stable and predictable to eliminate the negative impact of inflation uncertainty Key words: inflation, inflation uncertainty, relationship, GARCH models, Granger causality tests vii Chapter 1: Introduction 1.1 Background of the Study Vietnam experienced hyperinflation in the late 1980s (approximately 300%/year) and early 1990s (approximately 50%/year) due to bad weather, weak financial system, and especially poor governance of the authority The year 1995 marked an important turning point when hyperinflation was completely controlled and Vietnam began its deep international integration (i.e formally normalized diplomatic relations with the US and became the full member of ASEAN) The years after 1995 witnessed the 1997-1998 Asian Financial Crisis and its consequences to the world prices and aggregate demand Because of the negative consequences of the crisis, both demand for Vietnamese goods and domestic demand declined This period was marked by low inflation with mild deflation in 2000 (-0.5%) despite rapid monetary and credit growth (approximately 3040%/year) and VND’s sharp devaluation (approximately 36%) in the period 19972003 (Nguyen & Nguyen, 2010) After the period of stably low inflation, inflation began increasing sharply with 9.5% in 2004 When the negative impact of the Asian crisis declined, demand began to rise Demand increase and the rise of salary in both the public and FDI sector in 2003 pushed the prices to rise Additionally, supply shocks (due to bird flu and bad weather) contributed to the price increase The government considered supply shocks mainly responsible for inflation Food prices increased by 15.5% compared with the general inflation rate of 9.5% and inflation of non-food products was 5.2% in 2004 (Nguyen & Nguyen, 2010) For the fear of increasing inflation, State Bank of Vietnam (SBV) implemented tightening monetary policy, making interest rates increase slightly, and fixed the exchange rate since 2004 The rigid management of exchange rate until late-2008 did not stabilize inflation as in the period 2000-2003 Inflation, after declining slightly in 2006, increased sharply to 12.6% in 2007 and up to 20% in 2008 (Nguyen & Nguyen, 2010) There are many causes of high inflation in the period 2007-2008, which include the sharp increase of minimum wage rate, sharp rise of international commodity prices, lax and inflexible monetary policy, rigid exchange rate management, and the opening of Vietnam to the world economy since Vietnam’s join the WTO in late-2006, leading to indirect investment flows of foreign countries into Vietnam, pushed stock prices and asset prices increase dramatically To stabilize the exchange rate, SBV had to pump a large amount of money into the economy (approximately VND 145 thousand billion), contributing to more severe inflation In fact, the increase of money supply and credit growth in the economy in the last decade was very strong, especially in 2007 when M2 increased by 47% and credit growth increased by 54% (Nguyen & Nguyen, 2010) Impacts of the 2007-2008 Global Financial Crisis made inflation slow down in Vietnam since late-2009 The decrease of international prices and total demand made Vietnam reverse alarming trend of increased inflation since 2008 However, for fear of recessionary impacts, the government introduced the stimulus package since the second quarter of 2009, which made money supply and credit soar The early months of 2010 saw relatively stable inflation rates However, inflation increased sharply since September 2010 and reached 11.75% for the whole year In general, the period 1995-2010 is the relatively stable inflation time compared with the hyperinflation period in the late 1980s-early 1990s Inflation is rather low in a decade from 1996 to 2006 However, high inflation has returned to the Vietnamese economy since 2007 with two-digit inflation rate, which poses many threats to the economy 1.2 Problem Statement Inflation is a worldwide problem that causes a negative impact on every economy in the world In the Vietnamese case, the country incurred relatively high ability in such bad situations, which in turn raises inflation uncertainty All these factors contribute to the sharp increase of inflation uncertainty during the two crises -1 -2 1996 1998 CPI 2000 2002 2004 2006 2008 2010 INFLATIONUNCERTAINTY Figure 4.4: Inflation and inflation uncertainty over the period 1995-2010 As we can see from figure 4.4, inflation and inflation uncertainty seem to have a positive relationship Inflation and inflation uncertainty move in the same direction with increasing inflation going with more inflation uncertainty, and vice versa However, this graphical observation just gives a suggestion about the possible relationship between the two variables In order to investigate this relationship evidently, we have to carry out the next Granger causality tests 4.5 Granger causality tests Table 4.5: Granger Causality Tests Ho: Inflation does not Granger-cause inflation F-Statistic P-value Two lags 24.4512 (+) 5.E-10 Four lags 11.1935 (+) 5.E-08 Six lags 6.40994 (+) 5.E-06 Eight lags 4.55270 (+) 5.E-05 uncertainty 46 Ten lags 3.30616 (+) 0.0007 Twelve lags 2.96270 (+) 0.0010 Two lags 2.35820 (+) 0.0976 Four lags 1.89138 (+) 0.1143 Six lags 2.09658 (+) 0.0564 Eight lags 2.26030 (+) 0.0260 Ten lags 2.42267 (+) 0.0106 Twelve lags 6.03654 (+) 2.E-08 Ho: Inflation uncertainty does not Grangercause inflation Notes: (+) and (-) are the signs of the sum of coefficients of lagged variables (inflation in the first hypothesis and inflation uncertainty in the second hypothesis) Table 4.5 reports the results of Granger causality tests for the inflationinflation uncertainty nexus at two, four, six, eight, ten, and twelve lags The first null hypothesis of causality not going from inflation to inflation uncertainty is rejected at all lags at 1% level of statistical significance Similarly, the second null hypothesis of inflation uncertainty not Granger-causing inflation is also rejected at all lags at 10% level of statistical significance or smaller, except for the test at lag four In addition, the positive signs of the sum of lagged inflation in the first hypothesis and lagged inflation uncertainty in the second hypothesis at all lags suggest the positive bi-directional relationship between inflation and inflation uncertainty It means that rising inflation will lead to a rise in inflation uncertainty, which confirms the Friedman-Ball hypothesis In the meantime, more inflation uncertainty will lead to more inflation, which confirms the Cukierman-Meltzer hypothesis Evidence of the Cukierman-Meltzer hypothesis indicates that the government and SBV might not have been determined to fight inflation It has been widely discussed in the literature about the relationship between the independence of the 47 central bank and the effects of uncertainty on inflation (i.e Cukierman, Web & Neyapti (1992); Alesina & Summers (1993); Grier and Perry (1998)) According to Grier and Perry (1998), rising uncertainty causes inflation to decrease in economies where the central banks are highly independent Conversely, central banks which have low independence (measured by Cukierman et al (1992), Alesina & Summers (1993)) exhibit ‘opportunistic’ behavior Specifically, they can use a rise in uncertainty to increase inflation with an effort to stimulate output growth Empirical evidence is found in Grier and Perry (1998); the Holland hypothesis is approved in the US, the UK and Germany which have high central bank independence On the other hand, the Cukierman-Meltzer hypothesis is approved in Japan and France which have relatively low central bank independence Another study by Fountas et al (2004) concludes that the Holland hypothesis holds in Germany and the Netherlands which have strongly independent central banks However, the Cukierman-Meltzer hypothesis is confirmed in Italy, Spain, and France which have relatively low central bank independence Thornton (2007) also comes up with the similar conclusion, Colombia, Israel, Mexico, and Turkey are the countries which have moderate to high independent central banks; and the Holland hypothesis holds for these economies Meanwhile, evidence of the CukiermanMeltzer hypothesis in Hungary, Indonesia, and Korea is partly the result of low independent central banks The State Bank of Vietnam is considered not an independent organization; the governor is a member of the cabinet Moreover, SBV is strongly influenced by the Party’s policies As a result, SBV normally has less autonomy in conducting monetary policy, which helps to explain why evidence of the Cukierman-Meltzer hypothesis is found in Vietnam over the period 1995-2010 4.6 Comparison with previous studies As for the confirmation of the Friedman-Ball hypothesis, the finding in this study is consistent with all previous studies using both the two-step approach such 48 as Grier and Perry (1998), Thornton (2007), Fountas et al (2004), Daal et al (2005), Erkam and Cavusoglu (2008), Nazar and Mojtaba (2010), Asghar et al (2011) and the simultaneous estimation approach such as Caporale and McKiernan (1997), Fountas (2001), Kontonikas (2004), Thornton (2006), Keskek and Orhan (2010) This finding once again confirms that the Friedman-Ball hypothesis holds in all countries regardless of the econometric techniques to find out the relationship In terms of the confirmation of the Cukierman-Meltzer hypothesis, this study is in line with the majority of previous studies using the two-step approach such as Grier and Perry (1998), Thornton (2007), Fountas et al (2004), Daal et al (2005), Erkam and Cavusoglu (2008), Nazar and Mojtaba (2010), Asghar et al (2011) However, it is worth noticing that the finding for Vietnamese case is not similar to all countries in these listed studies, implying that the relationship running from inflation uncertainty to inflation is different across countries due to the dissimilarity in the independence of the central bank and economic development Regarding transitional countries which share much similarity with Vietnam like Russia (Erkam & Cavusoglu, 2008), the results are similar, with the support for both the Friednam-Ball hypothesis and Cukierman-Meltzer hypothesis With respect to other countries in the Southeast Asian region, the findings agree with the study of Jiranyakul and Opiela (2010), which confirms both the Friedman-Ball hypothesis and Cukierman-Meltzer hypothesis in Malaysia, Indonesia, the Philippines, Singapore, and Thailand 4.7 Chapter Summary This chapter has presented the research findings Descriptive statistics indicate the high and volatile nature of inflation during this period The evidence from variance equations shows an asymmetric impact of inflation shocks on inflation uncertainty, indicating that a positive inflation shock induces higher inflation uncertainty, while a negative inflation shock induces lower inflation 49 uncertainty Moreover, the Friedman-Ball hypothesis and Cukierman-Meltzer hypothesis are also strongly supported 50 Chapter 5: Conclusion and Policy Implications 5.1 Conclusion The study has analyzed the inflation-inflation uncertainty relationship in Vietnam over the period 1995-2010 using the two-step procedure First, different types of GARCH models (GARCH(1,1), EGARCH(1,1), TARCH(1,1), PARCH(1,1)) are employed to estimate inflation uncertainty Based on information criteria including AIC, SC, and HQ as well as diagnostic tests, AR(13)EGARCH(1,1) is considered the best model to model inflation uncertainty Then Granger causality tests are employed to test the causality between inflation and inflation uncertainty (estimated by the AR(13)-EGARCH(1,1) model) The results support the following conclusions First, there exists an asymmetric impact of inflation shocks on inflation uncertainty, indicating that a positive inflation shock induces higher inflation uncertainty, while a negative inflation shock induces lower inflation uncertainty Second, a rise in inflation significantly leads to more inflation uncertainty, which confirms the Friedman-Ball hypothesis Third, more inflation uncertainty will lead to more inflation, confirming the Cukierman-Meltzer hypothesis, which indicates an “opportunistic” State Bank of Vietnam (SBV) 5.2 Policy Implications The study suggests many implications for policymakers concerning inflation and inflation uncertainty As for the causal direction from inflation to inflation uncertainty, the following suggestions are proposed Firstly, the asymmetric impacts of inflation shocks on inflation uncertainty are identified through the TARCH, PARCH, and EGARCH framework, which indicates the necessity of inflation stabilization policies If these policies are successfully implemented, inflation level will be reduced, and eventually lower the 51 succeeding price volatility Moreover, Granger causality test results significantly confirm the Friedman-Ball hypothesis in Vietnam over the period 1995-2010, implying that increasing inflation leads to more uncertainty We are well aware of the negative consequences of uncertainty on the real economy (discussed in the literature review section) As a result, it is once again important to carry out inflation stabilization programs successfully to lower the succeeding inflation uncertainty However, what should the policy makers in details? Historically, high inflation in Vietnam is due to a combination of many causes First, cost-push inflation (fuel, raw material, salary, etc have increased sharply during the past five years, pushing the price of goods increase); second, demand-pull inflation (demand of consumers, enterprises and the government increase especially in a developing countries like Vietnam, ineffective investments of SOEs (Vinashin is a typical case)); third, monetary inflation (excessive supply of M2 and credit in the economy, for example, in the period 2007-2010 M2 increased by 121% while GDP increased by only 26.8%) All these factors happened at the same time, increasing inflation rates dramatically over the past few years Hence, there must be a good combination of monetary policy, fiscal policy, and administrative measures to stabilize inflation not only in the short-run but also in the long-run With respect to monetary policy, SBV must reduce the amount of money in circulation by: rising interest rates, reserve requirement, and limit M2 and credit growth (for example, the government has tried to limit M2 growth of approximately 15-16% and credit growth of 15%-18% in 2011) Furthermore, SBV should issue more bonds and assign them to commercial banks to withdraw money from circulation In terms of exchange rate management, VND should be adjusted to increase slightly against USD This is in line with the current situation of USD’s losing its value against other major currencies Slightly increased value of VND may affect exports; however, the negative impacts are not too large Meanwhile, VND’s increase in value will reduce import prices, increase supply, reduce the 52 prices in the domestic market (as import accounting for the majority of the country's GDP), and make the income of the residents more valuable With respect to fiscal policy, the government must control government spending, public investment and investment of SOEs tightly Specifically, unnecessary administrative expenses in state agencies must be reduced to lower pressure on the demand side Most importantly, the government must improve the effectiveness of public investment and SOEs investment; inefficient projects must be strongly eliminated With respect to administrative measures, the government must improve the network of supplying goods so that goods going from producers to consumers through less middle men, which reduces transaction costs and price level especially in high-demand period such as Lunar New Year, new school year Additionally, the authority has to limit the speculation of necessities (such as food which accounts for nearly 50% of CPI basket), support the low-income people through various social programs Finally, there must be good coordination among different departments and local authorities in the implementing stage to create collective power to ensure the success of inflation stabilization programs In summary, strong coordination among fiscal policy, monetary policy, and administrative measures would help to respond effectively to all causes of inflation In particular, fiscal policy would help reduce the “pain” caused by tightening monetary policy (for example, people having monthly income lower than VND million are exempted from personal income tax from August to December 2011; enterprises are reduced by 30% corporate income tax in 2011), making the fight against inflation does not affect sustainable growth and employment As for the relationship running from inflation uncertainty to inflation, the strong evidence of the Cukierman-Meltzer hypothesis explicitly shows an “opportunistic” SBV which has not followed the price stabilization policy consistently In other words, it supports the government's development and industrialization targets, and often finances the fiscal deficits that results In order to 53 reduce inflation uncertainty, the monetary authorities should adopt the following recommendations Firstly, the government and SBV must show strong determination of controlling inflation, consider it as the top priority Policy responses must be announced and implemented quickly whenever there are threats of inflation Moreover, the authorities must monitor the implementation process, making sure that the policies have quick, strong, stable and predictable effects These quick responses and proper monitoring will create belief in the investors and public; thereby inflation uncertainty can be reduced both in the short-run and long-run Secondly, the government and SBV have to eliminate asymmetric information problem to ensure that the general public are well-informed of causes, current state, solutions, and forecasts of inflation In particular, information about food prices, fuels, as well as exchange rate, interest rate policy, credit growth target, forecast of essential import and export product prices, etc should be better explained and broadcast to the general public through various forms of the media (television, radio, newspapers, internet, etc.) These actions help to communicate the policy stance, rationalize and anchor inflation expectation Thirdly, SBV, the main agency responsible for fighting inflation, must be strengthened to set and implement monetary policy more effectively Currently, SBV exhibits many weaknesses such as weak autonomy and overreliance on administrative instruments These drawbacks are due to not only political but also technical factors In terms of political side, the governor does not have full autonomy to make and implement monetary measures to achieve the inflationary target Technically, SBV tends to use administrative measures, which indicates “central planning” way of managing monetary policy, which is old-fashioned in the modern market economy Hence, SBV must be restructured in terms of organization, operations and human resources to perform its function better This would eventually increase SBV’s transparency and accountability, which helps reduce uncertainty 54 If these measures are implemented successfully, uncertainty will be eliminated, reducing much economic loss 5.3 Limitation and Further Studies 5.3.1 Limitation Although this study has answered all the research questions about the inflation-inflation uncertainty relationship properly, it also has some limitations First, as discussed in the literature review section, the two-step approach has the problem of generated regressors Inflation uncertainty generated in the first step is employed as the regressor in the second step This causes the problem of multicollinearity because inflation and inflation uncertainty have a strong relationship Consequently, the standard errors in the Granger tests are biased, which may cause the biasness of Granger tests’ results Second, it does not take into account monetary and exchange rate regimes explicitly in the model Third, the data cover a relatively short time span of only sixteen years since 1995 when inflation and macro economy in Vietnam have been relatively stable The difficulties in obtaining inflation data in from 1986 to 1994 refrained us from investigating the relationship for this very interesting period with a lot of volatility and changes in macro economy 5.3.2 Further Studies The credibility of monetary policy plays an important role in determining the level of inflation uncertainty Hence, further study should employ different models which can consider effects of monetary and exchange rate regimes on inflation uncertainty explicitly Additionally, future study may investigate this relationship after the year 2010 to identify whether the above-mentioned results continue hold for Vietnam, especially whether we can find a “stabilizing” SBV after 2010 55 Potential studies may also examine the effect of inflation as well as inflation uncertainty on real output growth employing the method of estimating inflation uncertainty presented in this research Moreover, it is interesting to use Markovswitching model to investigate the negative impacts of inflation as well as inflation uncertainty on real output growth in Vietnam which have experienced different inflation regimes from hyperinflation in late 1980s-early 1990s to stable inflation in late 1990s- early 2000s, and surging inflation since 2007 56 References Alesina, A., & Summers, H L (1993) Central bank independence and macroeconomic performance: some comparative evidence Journal of Money, Credit and Banking 25(2), 151-162 Asghar, A., Ahmad, K., Ullah, S., Bedi-uz-Zaman & Rashid, M T (2011) The relationship between inflation and inflation uncertainty: a case study for Saarc region countries International Research Journal of Finance and Economics, 66, 86-98 Asteriou, D & Hall, S.G (2007) Applied Econometrics: A Modern Approach Using Eviews and Microfit Revised Edition Palgrave Macmillan Baharumshah, A Z., Hasanov, A., & Fountas S (2011) Inflation and inflation uncertainty: Evidence from two Transition Economies Discussion Paper Series, Department of Economics, University of Macedonia Baillie, R., Chung, C., & Tieslau, M (1996), Analysing inflation by the fractionally integrated ARFIMA-GARCH model Journal of Applied Econometrics, 11 (1), 23-40 Ball, L (1992) Why does high inflation raise inflation uncertainty Journal of Monetary Economics, 29, 371–388 Brunner, A D., & Hess, G D (1993) Are higher levels of inflation less predictable? 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Sub-questions: (i) Is there an asymmetric impact of inflation shocks on inflation uncertainty? (ii) Does inflation. .. examine whether there is an asymmetric impact of inflation shocks on inflation uncertainty in Vietnam (ii) test whether inflation causes inflation uncertainty in Vietnam (iii) test whether inflation