Premium
Inflation Targeting and Inflation Uncertainty
Author(s) -
Taş Bedri Kamil Onur
Publication year - 2012
Publication title -
scottish journal of political economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.4
H-Index - 46
eISSN - 1467-9485
pISSN - 0036-9292
DOI - 10.1111/j.1467-9485.2012.00581.x
Subject(s) - economics , inflation (cosmology) , autoregressive conditional heteroskedasticity , volatility (finance) , inflation targeting , econometrics , variance (accounting) , conditional variance , economic stability , real interest rate , monetary policy , monetary economics , macroeconomics , physics , accounting , theoretical physics
This article empirically investigates the impact of inflation targeting on inflation uncertainty. We implement PARCH and GARCH methodologies to model conditional variance of inflation. We also investigate the relationship between level and volatility of inflation to analyze the validity of the F riedman hypothesis for IT countries. We find that most of the inflation targeting countries have significantly lower inflation variances after inflation targeting. In most of the IT countries, the relationship is consistent with the F riedman hypothesis.