The relationship between output growth and inflation: Evidence from Turkey (original) (raw)
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Emerging Markets Finance and Trade, 2011
In this paper, we examine causal relationships among inflation rate, output growth rate, inflation uncertainty and output uncertainty for ten Central and Eastern European transition countries. For this purpose, we estimate a bivariate GARCH model that includes output growth and inflation rates for each country. Then we use conditional standard deviations of inflation and output to proxy nominal and real uncertainty, respectively, and perform Granger-causality tests. Our results suggest that inflation rate induces uncertainty about both inflation rate and output growth rate, which is detrimental for real economic activity. On the other hand, we find that output growth rate reduces macroeconomic uncertainty. In addition, we also examine and discuss causal relationships among remaining variables. JEL Classification Codes: C32, C51, C52, E10, E30
2017
In the this paper, we analyze the causality between inflation and inflation uncertainty in Kuwait. The monthly consumer price index during the period from January 1992 to September 2016 has been used to measure inflation. The inflation uncertainty is estimated by the conditional variances of inflation obtained using the Akaike, Schwarz information criteria and Hannan-Quinn criteria. In order to ensure the robustness of the results, the Granger-causality technique is performed. The study findings show that the inflation significantly Granger-causes inflation uncertainty, supporting Friedman-Ball hypothesis. However, no empirical evidence is found to support the Cukierman-Meltzer hypothesis (1986) and only unidirectional relation is evident with causality running from inflation to inflation uncertainty. High volatility persistence for inflation is also confirmed. The findings of the study may be useful for policymakers at central bank to apply more efficient monetary measures.
ON THE NONLINEAR CAUSALITY BETWEEN INFLATION AND INFLATION UNCERTAINTY IN THE G3 COUNTRIES
Journal of Applied Economics, 2011
This study examines the dynamic relationship between monthly inflation and inflation uncertainty in Japan, the US and the UK by employing linear and nonlinear Granger causality tests for the 1957:01-2006:10 period. Using a generalised autoregressive conditional heteroskedasticity (GARCH) model to generate a measure of inflation uncertainty, the empirical evidence from the linear and nonlinear Granger causality tests indicate a bi-directional causality between the series. The estimates from both the linear vector autoregressive (VAR) and nonparametric regression models show that higher inflation rates lead to greater inflation uncertainty for all countries as predicted by Friedman (1977). Although VAR estimates imply no significant impact, except for Japan, nonparametric estimates show that inflation uncertainty raises average inflation in all countries, as suggested by . Thus, inflation and inflation uncertainty have a positive predictive content for each other, supporting the Friedman and Cukierman-Meltzer hypotheses, respectively. JEL classification codes: C22, E31.
The Causal Analysis of the Relationship between Inflation and Output Gap in Turkey
The purpose of the paper is to study dynamic relationships between the inflation and output gap by using Granger causality, Impulse response and variance decompositions analysis within VECM framework for the quarterly data over the first period of 2003 and second period of 2016. The results of the study indicate that the output gap Granger cause the inflation in Turkey both in short-and long-runs. Also, sign of the causality is negative and same causal relationships between two variables hold beyond the sample period. The results should be taken as an evidence of the conclusion that the output gap has important implications for the CBRT's monetary policy.
2015
There are many harmful impacts of inflation and inflation volatility in any economy, which includes increasing the risk premium, costs of hedging, and consequently leads to redistribution of national income between strata of society unfairly. Therefore, this study came to test the relationship between inflation and inflation uncertainty for Jordan from 1976 to 2013. For that purpose we employing two different methodologies generalized autoregressive conditional heteroscedasticity (GARCH) process, and the granger causality technique. The results of the GARCH model support the hypothesis of Friedman and Ball through Indicating strong support for the presence of a positive relationship between the inflation rate and its uncertainty. The Granger causality results report supporting hypothesis of Cukierman and Meltzer in 1986, and also Granger causality test running in the both ways.
The relationship between inflation and inflation uncertainty in the UK: 1885–1998
Economics Letters, 2001
In the present study, we examine the relationship between inflation and inflation uncertainty in Turkey from 2002 to 2011 using two-step procedure. At first step, ARMA-GARCH model of monthly inflation data is estimated and the conditional variance from these estimates is indicated as the monthly inflation uncertainty series. Then, the Granger causality tests between primarily inflation and generated inflation uncertainty series are performed. Empirical results of our study provided strong evidence in favor of the Friedman-Ball hypothesis that inflationary period result in high inflation uncertainty in Turkish case. These results present significant implications for the relationship between inflation and inflation uncertainly in developing countries as much as monetary policy adopted Inflation Targeting in Turkey.
The time-varying effect of inflation uncertainty on inflation for Turkey
Applied Economics Letters, 2016
We investigate the effect of inflation uncertainty on inflation from January 1982 through March 2016 for Turkey by using the Stochastic Volatility in Mean model with time-varying parameters. Our empirical evidence from consumer price index (CPI) inflation suggests that the observed positive relationship between inflation and inflation uncertainty is not robust. This positive relationship diminishes after 2002. This finding is valid for all five subcomponents of CPI inflation; however, for Health Services, Transportation Services, and Recreational and Cultural Services, an inflation-positive association is reported after 2010.