Inflation and Inflation Uncertainty in North Macedonia: A GARCH Model Approach

Murat Sadiku () and Luljeta Sadiku ()
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Murat Sadiku: South East European University, Faculty of Business and Economics
Luljeta Sadiku: International Balkan University, Faculty of Economics and Administrative Sciences

Chapter Chapter 20 in Economic Resilience and Sustainability - Vol. 2, 2026, pp 317-326 from Springer

Abstract: Abstract Understanding inflation uncertainty is crucial for designing effective monetary policy, particularly in small and open economies such as North Macedonia. Therefore, the main purpose of this study is to analyze the volatility of inflation serving as a proxy for inflation uncertainty. Employing the Generalized Autoregressive Conditional Heteroscedasticity (GARCH) model and using monthly data from January 2002 to March 2025, inflation uncertainty is observed by the volatility in time series allowing for a dynamic examination of how inflation uncertainty has evolved under the current monetary regime. Also, the relationship between inflation and inflation uncertainty is examined using the Granger causality test. The results confirm that inflation volatility is persistent over time, justifying the use of GARCH model. While causality tests suggest a bi-directional relationship.

Keywords: Inflation uncertainty; Monetary policy; Price stability; GARCH (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-032-04214-9_20

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DOI: 10.1007/978-3-032-04214-9_20

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