THE INFLATION - INFLATION UNCERTAINTY NEXUS IN ROMANIA

Daniela Zapodeanu, Mihail Ioan Cociuba () and Sorina Petris
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Daniela Zapodeanu: University of Oradea, Faculty of Economic Science, Oradea, Romania,
Mihail Ioan Cociuba: University of Oradea, Faculty of Economic Science, cociuba@gmail.com, Oradea, Romania,
Sorina Petris: University of Oradea, Faculty of Economic Science, Oradea, Romania,

Journal of Public Administration, Finance and Law, 2014, vol. s1, issue Special issue 1, 38-43

Abstract: This study explores the causality between inflation and inflation uncertainty in Romania using monthly inflation data for the 1996:01-2012:12 period. If inflation uncertainty is defined as being the variance of unpredictable component of inflation then the use of autoregressive conditional heteroskedastic models can capture inflation uncertainty through the conditional variance of inflation. Inflation uncertainty is obtained from a GARCH model, while checking for any structural break in the series we find that there are possible structural breaks. The structural breaks in mean are captured using dummy variables in the AR-GARCH models and the best models are identified using the informational criterion. The influence between inflation uncertainty and inflation is tested using Granger causality. We find bidirectional causality between inflation and inflation uncertainty.

Keywords: inflation; inflation uncertainty; Romania (search for similar items in EconPapers)
JEL-codes: E31 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:aic:jopafl:y:2014:v:s1:p:38-43

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