Korap, Levent (2010): Threshold GARCH modeling of the inflation & inflation uncertainty relationship: historical evidence from the Turkish economy. Published in: İstanbul Üniversitesi İktisat Fakültesi Mecmuası , Vol. 60, No. 2 (2010): pp. 157-172.
Download (393kB) | Preview
In this paper, the preceding / causal relationships between inflation and inflation uncertainty have been tried to be examined for the Turkish economy. Dealing with the information content of this relationship, we estimate that positive inflationary shocks are associated with statistically significant and quantitatively larger levels of inflation uncertainty than are negative shocks. Our estimation results indicate that inflation in fact leads to inflation uncertainty in line with the Friedman-Ball hypotheses. However, our findings contradict the Cukierman-Meltzer hypotheses that inflation uncertainty leads to inflation in a positive way. We find that the larger the inflation uncertainty the lower would likely to be the level of inflation.
|Item Type:||MPRA Paper|
|Original Title:||Threshold GARCH modeling of the inflation & inflation uncertainty relationship: historical evidence from the Turkish economy|
|English Title:||Threshold GARCH modeling of the inflation & inflation uncertainty relationship: historical evidence from the Turkish economy|
|Keywords:||Inflation; Inflation Uncertainty; Threshold GARCH Modeling; Granger Causality Analysis; Turkish Economy;|
|Subjects:||C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and Estimation
C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models; Multiple Variables > C32 - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level; Inflation; Deflation
|Depositing User:||Levent Korap|
|Date Deposited:||22. Jun 2011 12:31|
|Last Modified:||12. Feb 2013 18:52|
Akyazı, H. and Artan, S. (2004), “Türkiye’de Enflasyon-Enflasyon Belirsizliği İlişkisi ve Enflasyon Hedeflemesinin Enflasyon Belirsizliğini Azaltmadaki Rolü”, Türkiye Bankalar Birliği Bankacılar Dergisi, 48, 3-17.
Ball, L. and Cecchetti, S.G. (1990), “Inflation and Uncertainty at Short and Long Horizons”, Brookings Papers on Economic Activity, 1, 215-54.
Ball, L. (1992), “Why Does Higher Inflation Raise Inflation Uncertainty?”, Journal of Monetary Economics, 29, 371-78.
Barro, R.J. and Gordon, D.B. (1983), “A Positive Theory of Monetary Policy in a Natural Rate Model”, Journal of Political Economy, 91, 589-610.
Bollerslev, T. (1986), “Generalized Autoregressive Conditional Heteroskedasticity”, Journal of Econometrics, 31, 307-27.
Bollerslev, T. and Wooldridge, J.M. (1992), “Quasi-maximum Likelihood Estimation and Inference in Dynamic Models with Time Varying Covariances”, Econometric Reviews, 11, 143-72.
Caporale, B. and Caporale, T. (2002), “Asymmetric Effects of Inflation Shocks on Inflation Uncertainty”, Atlantic Economic Journal, 30/4, 385-88.
Cukierman, A. (1992), Central Bank Strategy, Credibility, and Independence. Cambridge: MIT Press.
Cukierman, A. and Meltzer, A. (1986), “A Theory of Ambiguity, Credibility, and Inflation under Discretion and Asymmetric Information”, Econometrica, September, 54, 1099-128.
Daal, E., Naka, A. and Sanchez, B. (2005), “Re-examining Inflation and Inflation Uncertainty in Developed and Emerging Countries”, Economics Letters, 89, 180-86.
Dickey, D.A. and Fuller, W.A. (1981), “Likelihood Ratio Statistics for Autoregressive Time Series with Unit Roots”, Econometrica, 49, 1057-072.
Engle, R.F. (1982), “Autoregressive Conditional Heteroskedasticity with Estimates of the Variance of U.K. Inflation”, Econometrica, 50, 987-1008.
Fountas, S. (2001), “The Relationship between Inflation and Inflation Uncertainty in the UK: 1885-1998”, Economics Letters, 74, 77-83.
Fountas, S., Karanasos, M. and Kim, J. (2002), “Inflation and Output Growth Uncertainty and their Relationship with Inflation and Output Growth”, Economics Letters, 75, 293-301.
Friedman, M. (1977), “Nobel Lecture: Inflation and Unemployment”, Journal of Political Economy, 85/3, 451-72.
Glosten, L.R., Jaganathan, R. and Runkle, D. (1993), “On the Relation between the Expected Value and the Volatility of the Nominal Excess Returns on Stocks”, Journal of Finance, 48, 1779-801.
Göktaş, Ö. (2005), Teorik ve Uygulamalı Zaman Serileri Analizi, İstanbul: Beşir Kitabevi.
Granger, C.W.J. and Newbold, P. (1974), “Spurious Regressions in Economics”,Journal of Econometrics, 2/2, 111-20.
Grier, K.B. and Perry, M.J. (1998), “On Inflation and Inflation Uncertainty in the G7 Countries”, Journal of International Money and Finance, 17/4, 671-89.
Henry, Ó.T., Olekalns, N., and Suardi, S. (2007), “Testing for Rate Dependence and Asymmetry in Inflation Uncertainty: Evidence from the G7 Economies”, Economics Letters, 94, 383-88.
Holland, A.S. (1995), “Inflation and Uncertainty: Tests for Temporal Ordering”, Journal of Money, Credit, and Banking, 27/3, 827-37.
Kontonikas, A. (2004), “Inflation and Inflation Uncertainty in the United Kingdom, Evidence from GARCH Modelling”, Economic Modelling, 21, 525-43.
Kwiatkowski, D., Phillips, P.C.B., Schmidt, P. and Shin, Y. (1992), “Testing the Null Hypothesis of Stationary against the Alternative of a Unit Root”, Journal of Econometrics, 54, 159-78.
Nas, T.F. and Perry, M.J. (2000), “Inflation, Inflation Uncertainty, and Monetary Policy in Turkey: 1960-1998”, Contemporary Economic Policy, 18/2, 170-80.
Neyaptı, B. and Kaya, N. (2001), “Inflation and Inflation Uncertainty in Turkey: Evidence from the Past Two Decades”, Yapı Kredi Economic Review, 12/2, 21-5.
Okun, A. (1971), “The Mirage of Steady Inflation”, Brookings Papers on Economic Activity, 2, 485-98.
Özer, M. and Türkyılmaz, S. (2005), “Türkiye’de Enflasyon ile Enflasyon Belirsizliği Arasındaki İlişkinin Zaman Serisi Analizi”, İktisat İşletme ve Finans, 5/229, 93-104.
Perron, P. (1989), “The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis,” Econometrica, 57, 1361-401.
Yavuz, N.Ç. (2004), “Durağanlığın Belirlenmesinde KPSS ve ADF Testleri: İMKB Ulusal-100 Endeksi ile bir Uygulama”, İstanbul Üniversitesi İktisat Fakültesi Mecmuası, 54/1, 239-47.
Zakoĭan, J.M. (1994), “Threshold Heteroskedastic Models”, Journal of Economic Dynamics and Control, 18, 931-44.
Zivot, E. and Andrews, D.W.K. (1992). “Further Evidence of Great Crash, the Oil Price Shock and the Unit Root Hypothesis”, Journal of Business and Economic Statistics, 10, 251-70.