Browsing by Subject "Inflation uncertainty"
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Item Open Access The effect of inflation uncertainty on inflation: stochastic volatility in mean model within a dynamic framework(Elsevier BV, 2009) Berument, Hakan; Yalcin, Y.; Yildirim J.This paper investigates the effect of inflation uncertainty innovations on inflation over time by considering the monthly United States data for the time period 1976-2006. In order to investigate the effect of inflation uncertainty innovation on inflation, a Stochastic Volatility in Mean model (SVM) has been employed. SVM models are generally used to capture the innovation to inflation uncertainty, which cannot be achieved in the framework of popular deterministic ARCH type of models. Empirical evidence provided here suggests that innovations in inflation volatility increases inflation persistently. This evidence is robust across various definitions of inflation and different sub-periods. © 2009 Elsevier B.V. All rights reserved.Item Open Access The effects of different inflation risk premiums on interest rate spreads(Elsevier BV, 2004) Berument, Hakan; Kilinc, Z.; Ozlale, U.This paper analyzes how the different types of inflation uncertainty affect a set of interest rate spreads for the UK. Three types of inflation uncertainty - structural uncertainty, impulse uncertainty, and steady-state inflation uncertainty - are defined and derived by using a time-varying parameter model with a GARCH specification. It is found that both the structural and steady-state inflation uncertainties increase interest rate spreads, while the empirical evidence for the impulse uncertainty is not conclusive. © 2003 Elsevier B.V. All rights reserved.Item Open Access Inflation and inflation uncertainty in the G-7 countries(Elsevier BV, 2005) Berument, Hakan; Dincer, N. N.This study examines the relationship between inflation and inflation uncertainty in the G-7 countries for the period from 1957 to 2001. The causality between the inflation and inflation uncertainty is tested by using the Full Information Maximum Likelihood Method with extended lags. Our results suggest that inflation causes inflation uncertainty for all the G-7 countries, while inflation uncertainty causes inflation for Canada, France, Japan, the UK and the US. Furthermore, we find that in four countries (Canada, France, the UK and the US) increased uncertainty lowers inflation, and in only one country (Japan), increased uncertainty raises inflation. © 2004 Elsevier B.V. All rights reserved.Item Open Access The inflation and inflation uncertainty relationship for Turkey: a dynamic framework(Springer, 2011) Berument, Hakan; Yalcin, Y.; Yildirim, J. O.This article assesses the interaction between inflation and inflation uncertainty in a dynamic framework for Turkey by using monthly data for the time period 1984-2009. The bulk of previous studies investigating the link between inflation and inflation uncertainty employ Autoregressive Conditional Heteroskedasticity (ARCH)-type models, which consider inflation uncertainty as a predetermined function of innovations to inflation specification. The stochastic volatility in mean (SVM) models that we use allow for gathering innovations to inflation uncertainty and assess the effect of inflation volatility shocks on inflation over time. When we assess the interaction between inflation and its volatility, the empirical findings indicate that response of inflation to inflation volatility is positive and statistically significant. However, the response of inflation volatility to inflation is negative but not statistically significant.Item Open Access Inflation and inflation uncertainty: a dynamic framework(Elsevier BV, 2012) Berument, Hakan; Yalcin, Y.; Yildirim J.This paper aims to investigate the direct relationship between inflation and inflation uncertainty by employing a dynamic method for the monthly country-region-place United States data for the time period 1976-2007. While the bulk of previous studies has employed GARCH models in investigating the link between inflation and inflation uncertainty, in this study Stochastic Volatility in Mean models are used to capture the shocks to inflation uncertainty within a dynamic framework. These models allow researchers to assess the dynamic effects of innovations in inflation as well as inflation volatility on inflation and inflation volatility over time, by incorporating the unobserved volatility as an explanatory variable in the mean (inflation) equation. Empirical findings suggest that innovations in inflation volatility increases inflation. This evidence is robust across various definitions of inflation and different sub-periods. © 2012 Elsevier B.V. All rights reserved.Item Open Access Public sector pricing behavior and inflation risk premium in Turkey(Routledge, 2003) Berument, HakanTurkey has had a high level of inflation since the mid-1970s. Governments use various fiscal and monetary policy tools to control inflation. In addition to these tools, governments also attempt to control inflation by regulating the prices of publicly produced goods and services. Governments either use the publicly produced goods' prices as a nominal anchor to decrease inflation, for example, the July 1997 and early 2000 anti-inflation programs, as a part of their general anti-inflation programs, or they try to postpone price increases of publicly produced goods and services until after elections, as was the case prior to the 1991, 1995, and 1999 elections. However, governments ultimately had to correct the lower prices in the public sector, mainly to avoid losses in the state-owned enterprises. In accordance with this, Turkish data suggest that, on average, price increases in the private and public sectors are approximately the same; however, these price increases are less frequent in the public sector than in the private sector. The purpose of this article is to show that this infrequency of price changes in the public sector increases the volatility of the general price level, causing uncertainty in forecasting general price level, and this, in turn, increases interest rates.