Browsing by Subject "Stochastic volatility"

Now showing 1 - 3 of 3

Open Access
Dynamics of post-pandemic inflation in Türkiye
(2024-08) İpek, Mahmut Sefa
In the post-pandemic period, Turkish inflation increased to levels last seen in the 1990s. Both the average level and dynamics of inflation in Türkiye were different from inflation in other Emerging European countries. This study employs a six-variable Bayesian vector autoregression (BVAR) model with stochastic volatility to estimate the historical decomposition of inflation in Türkiye during the post-pandemic period. The findings suggest that this period can be divided into two distinct episodes: from November 2021 to May 2023, inflation was driven by both domestic and global factors, with domestic ones being more dominant. From June 2023 onwards, inflation accelerated entirely by domestic factors.
Open Access
Free float and stochastic volatility: the experience of a small open economy
(Elsevier BV, 2004) Selçuk, F.
Following a dramatic collapse of a fixed exchange rate based inflation stabilization program, Turkey moved into a free floating exchange rate system in February 2001. In this paper, an asymmetric stochastic volatility model of the foreign exchange rate in Turkey is estimated for the floating period. It is shown that there is a positive relation between the exchange return and its volatility. Particularly, an increase in the return at time t results in an increase in volatility at time t+1. However, the effect is asymmetric: a decrease in the exchange rate return at time t causes a relatively less decrease in volatility at time t+1. The results imply that a central bank with a volatility smoothing policy would be biased in viewing the shocks to the exchange rate in favor of appreciation. The bias would increase if the bank is also following an inflation targeting policy. © 2004 Elsevier B.V. All rights reserved.
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.