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Inflation and Inflation Uncertainty in Latvia

Viktors Ajevskis ()

No 2007/04, Working Papers from Latvijas Banka

Abstract: The paper considers interrelation between inflation and inflation uncertainty in Latvia. The monthly growth in CPI in the period from January 1994 to June 2007 has been used as an inflation measure. The application of the GARCH-M model with lagged inflation in GARCH equation proves that a positive relationship between inflation and inflation uncertainty does exist. It suggests that increased inflation uncertainty raises inflation, and, vice versa, increased inflation is a cause for higher uncertainty about inflation in the future.

Keywords: inflation; inflation uncertainty; GARCH–M (search for similar items in EconPapers)
JEL-codes: C22 E31 E37 (search for similar items in EconPapers)
Date: 2007-11-21
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Persistent link: https://EconPapers.repec.org/RePEc:ltv:wpaper:200704

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