The inflation and inflation uncertainty relationship for Turkey: a dynamic framework

Date
2011
Editor(s)
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Co-Supervisor
Instructor
Source Title
Empirical Economics
Print ISSN
0377-7332
Electronic ISSN
1435-8921
Publisher
Springer
Volume
41
Issue
2
Pages
293 - 309
Language
English
Type
Article
Journal Title
Journal ISSN
Volume Title
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Abstract

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.

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Book Title
Keywords
Inflation, Inflation uncertainty, Stochastic volatility models, VAR, Impulse response
Citation
Published Version (Please cite this version)