Rizvi, Syed Kumail Abbas and Naqvi, Bushra (2009): Inflation Volatility: An Asian Perspective.
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The primary purpose of this study is to model and analyze inflation volatility in ten selected Asian economies. We used quarterly data of inflation from 1987Q1 to 2008Q4 to model inflation volatility as time varying process through different symmetric and asymmetric GARCH specifications. We also proposed to model inflation volatility on the basis of cyclic component of inflation obtained from HP filter, instead of actual inflation when the latter does not fulfill the criterion of stationarity. Through news impact curves we tried to highlight the behavior of inflation volatility in response to lagged inflation shocks, under different GARCH specifications for selected economies. Bivariate granger causality test is also applied to analyze the direction of causality between inflation and different volatility estimates. We get few important results. At first, leverage parameter shows expected sign and is significant for almost all countries suggesting strong asymmetry in inflation volatility. The hyperbolic sign integral shape of news impact curves based on GJR-GARCH is not only consistent with the results of our previous study based on Pakistani data (Rizvi and Naqvi, 2008) but also highlight the importance of inflation stabilization programs particularly because of the subsequent evidences obtained in favor of bidirectional causality running between inflation and inflation volatility. We also found that cyclic component of inflation could be a suitable proxy of inflation for volatility estimation.
|Item Type:||MPRA Paper|
|Original Title:||Inflation Volatility: An Asian Perspective|
|English Title:||Inflation Volatility: An Asian Perspective|
|Keywords:||Inflation Volatility, Uncertainty, GJR-GARCH, EGARCH, Asymmetry, Asia, Asian|
|Subjects:||E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation
C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E37 - Forecasting and Simulation: Models and Applications
|Depositing User:||Syed Kumail Abbas Rizvi|
|Date Deposited:||25. Dec 2009 07:56|
|Last Modified:||13. Feb 2013 09:03|
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