Inflation and inflation uncertainty: Evidence from two Transition Economies
Ahmad Zubaidi Baharumshah (),
Akram Hasanov () and
Stilianos Fountas ()
Discussion Paper Series from Department of Economics, University of Macedonia
This paper examines the causal link between inflation and inflation uncertainty for the transition economies of Russia and Ukraine. The Iterated Cumulative Sums of Squares Exponential Generalized Autoregressive Conditional Heteroskedasticity (ICSS-EGARCH-M-t) models that allow for asymmetry and regime shifts in the variance of inflation are employed to establish the inflation-inflation uncertainty causal relationship. We find three breaks in the inflation volatility series that coincide with the major historical events in these two countries. The empirical results reveal strong support of the Friedman-Ball hypothesis in both countries. Additionally, we discover that the reverse causal relation between inflation and inflation uncertainty as predicted by the Holland hypothesis holds in Ukraine, but this stabilization policy behavior does not seem to prevail in Russia.
Keywords: transition economies; inflation; inflation uncertainty; ICSS-EGARCH-t. (search for similar items in EconPapers)
JEL-codes: I20 I23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mon and nep-tra
Date: 2011-04, Revised 2011-04
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Persistent link: https://EconPapers.repec.org/RePEc:mcd:mcddps:2011_05
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