The sequence in which this analysis is developed, in particular presenting the economics of unanticipated inflation
before that of anticipatory inflation, corresponds to the temporal sequence of economic events during an inflation.
where GY is the growth rate of real GNP, CVI is a measure of inflation uncertainty, SHOCKI is unanticipated inflation
, ANTI is anticipated inflation,(5) computed as the difference between actual and unanticipated values, and [[mu].sub.t], is a white noise error term.
It has been advocated by Ansley (1979) and Weiss (1985) that reserve error misestimation is caused largely by unanticipated inflation
in the costs of settling claims.
The average rate of unanticipated inflation
is -0.48 percent (t = -.92) for LIV and -1.04 percent (t = -1.96) for LEASTSQ.
Parks  found unanticipated inflation
to be positively associated with movements in relative prices.
(These assumptions on Dln(y) and Dln(R) were tested by Rasche.) Instead of the price variable of equation (3), Rasche uses as a measure of unanticipated inflation
the residuals from an ARIMA (0,1,1) model.
The costs of inflation are associated with both anticipated and unanticipated inflation
Traditionally, the biggest risk for an investor choosing to lend to governments or companies over a longer time frame, rather than opting for a series of short term securities, is the threat of unanticipated inflation
. Hence, the 'underweight' in bonds as an asset class, both in our strategic, as well as our tactical asset allocation recommendation."
is a risk that investors in any nominal instrument face.
Keywords: Anticipated inflation Unanticipated inflation
Relative price variability Macroeconomic framework
Friedman  criticized this exploitation of the short-term inflation-unemployment trade-off, remarking that the temporary trade-off between inflation and unemployment "comes not from inflation per se, but from unanticipated inflation
, which generally means, from a rising rate of inflation." However, there is no permanent trade-off; hence governments should not employ the policy to stimulate employment with inflation.
occurs when people, businesses and governments make errors in their inflation forecasts.