Browsing by Subject "Inflation (Finance) Mathematical models."

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Open Access
Do inflation targeting regimes reduce inflation uncertainty? : evidence from five industrilized and five emerging countries
(2004) Ertürk, Burak
In this thesis, using a time-varying parameter model with GARCH specification, it was investigated whether there is a structural break in expected inflation and two types of inflation uncertainties –structural and impulse uncertainty- for five industrialized and five emerging countries after the implementation of inflation targeting. Many industrialized and emerging countries attempted to stabilize their price levels with the help of a monetary discipline satisfied by the features of inflation targeting. These regimes are thought to lower the uncertainties regarding inflation dynamics. This methodology allows decomposing two types of uncertainties and it was claimed that successful implementation of inflation targeting removes these uncertainties. Two types of tests were employed to detect this claim: A simple non-parametric test which examine whether the changes in the mean and the variance of expected inflation along with two types of inflation uncertainty are statistically significant; and a parametric test whether there has been a shift in mean or a shift in the trend for expected inflation and two types of uncertainties. Both non-parametric and parametric test results indicate that the inflation targeting regimes are particularly successful in reducing expected inflation while there is less evidence that implementation of inflation targeting reduce inflation uncertainty.
Open Access
Does inflation targeting matter in industrialized countries?
(2006) Acar, Ozan
After it was first adopted by the New Zealand in 1989, inflation targeting (IT) has became quite popular and several other countries have started to design their monetary policy strategies within the IT framework. In the literature, there are considerable amount of studies which discuss the underlying reasons of the popularity of IT and several of them come up with the conclusion that the increased macroeconomic performance of 1990s is attributable to the IT regime. In this thesis, we will try to discover the differing characteristics of the IT and non-IT countries in terms of their revealed aversion to inflation variability which is proposed in Cecchetti and Ehrmann (2000) (CE). Furthermore, we will investigate whether the path followed by the inflation in the aftermath of a demand shock for IT and non-IT countries are different from each other. All measures which we will be analyzed in this thesis will be estimated from a semi-structural dynamic time series model using extended Kalman filtering techniques.
Open Access
Evidence for 'Flight to Quality' hypothesis within an inflation uncertainty modelling
(2003) Güler, Bülent
There is a great literature devoted to link between inflation uncertainty and interest rates. However, there are opposing findings about the relationship between inflation uncertainty and interest rates. Some of the studies find a positive correlation between them, while some of them find a negative correlation. In this paper, we analyzed the link between inflation uncertainty and spreads among riskier and safer bonds within a model of a timevarying parameter model with an ARCH specification. We divided inflation uncertainty into two parts, structural uncertainty and impulse uncertainty, as indicated in Evans (1991), firstly. We estimated the relationship between these types of uncertainties and spreads among riskier and safer bonds, using USA data. The results indicate us that both structural and impulse uncertainties have significant relationship with spreads between corporate bonds, the riskier bonds, and treasury bills, the safer bonds. Especially having a positive effect of impulse uncertainty on spreads shows an important evidence for ‘Flight to Quality’ hypothesis.