The effect of inflation uncertainty on inflation: Stochastic volatility in mean model within a dynamic framework

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Berument H., YALÇIN Y., Yıldırım Öcal J.

ECONOMIC MODELLING, cilt.26, sa.6, ss.1201-1207, 2009 (SSCI) identifier identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 26 Sayı: 6
  • Basım Tarihi: 2009
  • Doi Numarası: 10.1016/j.econmod.2009.05.007
  • Dergi Adı: ECONOMIC MODELLING
  • Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus
  • Sayfa Sayıları: ss.1201-1207
  • Anahtar Kelimeler: Inflation, Inflation uncertainty, Stochastic volatility models, MAXIMUM-LIKELIHOOD-ESTIMATION, CONDITIONAL HETEROSCEDASTICITY, VARIANCE, REGIMES, LINK
  • TED Üniversitesi Adresli: Hayır

Özet

This paper investigates the effect of inflation uncertainty innovations on inflation over time by considering the monthly United States data for the time period 1976-2006. In order to investigate the effect of inflation uncertainty innovation on inflation, a Stochastic Volatility in Mean model (SVM) has been employed. SVM models are generally used to capture the innovation to inflation uncertainty, which cannot be achieved in the framework of popular deterministic ARCH type of models. Empirical evidence provided here suggests that innovations in inflation volatility increases inflation persistently. This evidence is robust across various definitions of inflation and different sub-periods. (C) 2009 Elsevier B.V. All rights reserved.