MODELLING INFLATION UNCERTAINTY IN TRANSITION ECONOMIES:THE CASE OF RUSSIA AND THE FORMER SOVIET REPUBLICS

Serkan Erkam and Tarkan Çavuşoğlu

Economic Annals, 2008, vol. 53, issue 178-179, 44-71

Abstract: This study investigates the linkage between inflation and inflation-uncertainty in seven transitional economies ( Armenia , Azerbaijan , Georgia , Kazakhstan , the Kyrgyz Republic , the Russian Federation and the Ukraine ) which experienced hyper-inflation until the mid-1990s. This linkage is investigated in the ARCH modelling framework by using both conventional Granger non-causality testing and the Holmes-Hutton approach, which has significant small- and large-sample power advantages over the former. The results support the Friedman-Ball hypothesis in Azerbaijan , the Russian Federation and the Ukraine . The Cukierman-Meltzer hypothesis is favoured in the Kyrgyz Republic and in the Russian Federation using a different model. In Azerbaijan , greater inflation uncertainty preceded lower rates of inflation, indicative of the strong monetary stabilization policies pursued in this economy.

Keywords: Inflation; inflationuncertainty; Granger-causality; conditional variance (search for similar items in EconPapers)
JEL-codes: C32 E31 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (2)

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