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Abstract
This research paper examines the relationship between inflation and inflation uncertainty for the Mexican economy during the period from January 1969 to February 2017. Using SARMA-GARCH models and their extensions (GJR-GARCH-M and E-GARCH-M), the study evidenced a negative causal effect of financial uncertainty on inflation (compliance with Holland?s hypothesis), which indicates that the Bank of Mexico exhibits a stabilizing behavior in relation to inflation. It also confirms the fulfillment of the Friedman-Ball hypothesis, which states that high levels of inflation increase inflation uncertainty.
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