The Relationship between Inflation and Inflation Uncertainty. Empirical Evidence for the Newest EU Countries

Viorică, Daniela; Jemna, Danut Vasile; Pintilescu, Carmen; Asandului, Mircea

doi:10.1371/journal.pone.0091164

Cited by 7 publications

(5 citation statements)

References 30 publications

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“…Other recent international literature on inflation and inflation uncertainty includes Ozdemir and Fisunoğlu (2008) Viorica et al (2014) on the newest EU countries.…”

Section: Literature Reviewmentioning

confidence: 99%

Causality between inflation and inflation uncertainty in South Africa: Evidence from a Markov-switching vector autoregressive model

Nasr

Balcılar

Ajmi

et al. 2015

Emerging Markets Review

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This study investigates the asymmetric and time-varying causality between inflation and inflation uncertainty in South Africa within a conditional Gaussian Markov switching vector autoregressive (MS-VAR) model framework. The MS-VAR model is capable of determining both the sign and direction of causality. We account for the nonlinear, long memory and seasonal features of inflation series simultaneously by measuring inflation uncertainty as the conditional variance of inflation generated by recursive estimation of a Seasonal Fractionally Integrated Smooth Transition Autoregressive Asymmetric Power GARCH (SEA-FISTAR-APGARCH) model using monthly data for the period 1921:01 to 2012:12. The recursive, rather than a full-sample, estimation allows us to obtain a time-varying measure of uncertainty and better mimics the real-time scenario faced by economic agents and/or policy makers. The inferred probabilities from the four-state MS-VAR model show evidence of a time-varying relationship. The conditional (i.e. lead-lag) and regime-prediction Granger causality provide evidence in favour of Friedman's hypothesis. This implies that past information on inflation can help improve the one-step-ahead prediction of inflation uncertainty but not vice versa. Our results have some important policy implications.

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“…Other recent international literature on inflation and inflation uncertainty includes Ozdemir and Fisunoğlu (2008) Viorica et al (2014) on the newest EU countries.…”

Section: Literature Reviewmentioning

confidence: 99%

Causality between inflation and inflation uncertainty in South Africa: Evidence from a Markov-switching vector autoregressive model

Nasr

Balcılar

Ajmi

et al. 2015

Emerging Markets Review

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“…Expected inflation uncertainty and exchange rate volatility are measured by means of conditional variances obtained by estimating GARCH class of models (see, e.g., Viorica, Jemna, Pintilescu, & Asandului, 2014; Kausar & Zulfiqar, 2017; Barguellil, Ben‐Salha, & Zmami, 2018). Mean and variance equations of Autoregressive EGARCH model are as follows.

Y_{t} = α_{0} + \sum_{i = 1}^{p} α_{i} Y_{t - i} + ε_{t}

where ε t = v t σ t and v t ≈ N (0, 1).

italicLn ((), σ_{t}^{2}) = λ_{0} + \sum_{i = 1}^{p} γ_{i} italicLn ((), σ_{t - i}^{2}) + \sum_{i = 1}^{q} α_{i} ((), |\frac{ε_{t - i}}{σ_{t - i}}|) + \sum_{k = = 1}^{r} θ_{k} \frac{ε_{t - k}}{σ_{t - k}}

…”

Section: Methodsmentioning

confidence: 99%

Effects of inflation uncertainty and exchange rate volatility on money demand in Pakistan: Bayesian econometric analysis

Akbar

2021

Int. J Fin Econ

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The study explores determinants of money demand (M2) in a developing economy of Pakistan using annual data ranging 1976-2017. The study contributes by two ways. Firstly, it specifically examines the potential impact of exchange rate volatility and inflation uncertainty along with conventional determinants on money demand in Pakistan. Secondly, Bayesian Statistical inference is employed and the estimates are interpreted along with highest posterior density intervals (HPDI) with probability statements in order to cope with the issue of the instability of parameters. The analysis explores the positive impact of real income as well as share prices and the negative effect of interest rate on money demand as predicted by theory and earlier findings. Significant negative estimate of exchange rate shows that substitution effect overcomes wealth effect during exchange rate variations. But magnitude of exchange rate elasticity seems to depend upon strength of depreciation rate and/or future expectations, which may be considered an important research question for future work. Insignificance of exchange rate volatility for money demand in Pakistan is found which requires further research as to know about the behaviour of wealth effect and expectation effect during forex market uncertainty. Most importantly, inflation uncertainty is found to be a potential determinant of money demand in Pakistan. Rising uncertainty of inflation rate seems to have direct effects on precautionary and transaction motives of the demand for money. Findings of this study provides useful insights for policymaking in Pakistan as well as in other developing economies by suggesting inflation uncertainty as the potential determinant of money demand. Finally, Bayesian estimates along with HPDI estimates provide new information about the effects and particularly about the possible range of elasticities.

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“…This is because uncertainty plays an important role in the upward bias observed in household inflation expectations (Haidari & Nolan, 2022). Viorica et al (2014) observed a positive relationship between inflation and uncertainty in a group of countries, namely Hungary, Poland, the Czech Republic, and Slovakia.…”

Section: Empirical Studies On Uncertainty and Inflationmentioning

confidence: 96%

“…This increase in current demand can result in higher inflation. The working hypothesis of Viorica et al (2014) is that groups of countries with a similar political and economic background are likely to be exhibit a similar causal relationship between inflation and inflation uncertainty.…”

Section: Figure 1: Inflation Rates Of Asean Member States From 2015 T...mentioning

confidence: 99%

The Effect of Uncertainty on Inflation: Evidence in ASEAN

Marasanti,

Verico

2024

JDE

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This article examines the relationships between extreme poverty, economic growth, and inequality, assesses if changes in inequality dampen the impact of income on extreme poverty, and determines the magnitude of the inequality growth trade-off index in Costa Rica, the Dominican Republic, and Honduras. A country-specific ARDL bound regression was conducted. The findings indicate the presence of direct and indirect dampening impacts of changes in inequality on income growth and extreme poverty reduction. The magnitude of the inequality growth trade-off- index indicates whether to prioritize growth and/or inequality reducing policies. This means that the higher the inequality, as in Honduras, the higher the economic or average income growth rate required to compensate for the increase in inequality to achieve a given level of extreme poverty reduction. Accordingly, there is no one-size-fits-all policy approach to tackling extreme poverty.

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The Relationship between Inflation and Inflation Uncertainty. Empirical Evidence for the Newest EU Countries

Cited by 7 publications

References 30 publications

Causality between inflation and inflation uncertainty in South Africa: Evidence from a Markov-switching vector autoregressive model

Causality between inflation and inflation uncertainty in South Africa: Evidence from a Markov-switching vector autoregressive model

Effects of inflation uncertainty and exchange rate volatility on money demand in Pakistan: Bayesian econometric analysis

The Effect of Uncertainty on Inflation: Evidence in ASEAN

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