Threshold GARCH modeling of the inflation & inflation uncertainty relationship: historical evidence from the Turkish economy

Levent Korap ()

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper, the preceding / causal relationships between inflation and inflation uncertainty have been tried to be examined for the Turkish economy. Dealing with the information content of this relationship, we estimate that positive inflationary shocks are associated with statistically significant and quantitatively larger levels of inflation uncertainty than are negative shocks. Our estimation results indicate that inflation in fact leads to inflation uncertainty in line with the Friedman-Ball hypotheses. However, our findings contradict the Cukierman-Meltzer hypotheses that inflation uncertainty leads to inflation in a positive way. We find that the larger the inflation uncertainty the lower would likely to be the level of inflation.

Keywords: Inflation; Inflation Uncertainty; Threshold GARCH Modeling; Granger Causality Analysis; Turkish Economy (search for similar items in EconPapers)
JEL-codes: C32 C51 E31 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (1)

Published in İstanbul Üniversitesi İktisat Fakültesi Mecmuası 2.60(2010): pp. 157-172

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:31765

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