Threshold GARCH modeling of the inflation & inflation uncertainty relationship: historical evidence from the Turkish economy

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.

Abstract

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
• Language: English
• 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 ; Diffusion Processes ; State Space Models; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation

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