Abstract
Problem statement: In this study, we tried to examine the relationship between inflation and inflation uncertainty in Iran, because of considerable variation in its inflation rate. Approach: Inflation uncertainty is the major cost of high inflation that can influence the decision making of economic agents. Results: This study constructed a time series of seasonally inflation uncertainty in Iran from 1959-2009 and investigated the relationship between inflation and inflation uncertainty. We modeled inflation uncertainty at time varying process through EARCH framework. Also, the asymmetric and consistence behavior of inflation uncertainty was analyzed by using this method. The result showed that there was an asymmetric relationship between inflation and inflation uncertainty and shocks inflation uncertainties do not die out rapidly. Thus, the positive shocks had a greater effect on uncertainty rather than negative shocks. In final, we investigated from the Granger Causality test that inflation was Granger Causality of inflation uncertainty. Conclusion/Recommendations: The results of study recommend to aiming at low average inflation rates in order to reduce the negative consequences of inflation uncertainty.
Highlights
Inflation is one of the most important economic variable both theoretically and empirically
The result of this study confirms the positive relationship between inflation and inflation uncertainty for the period 1959-2009 in Iran Economy
The method was used to capture the inflation uncertainty from inflation is the Exponential GARCH (EGARCH) model that proposed by Nelson
Summary
Inflation is one of the most important economic variable both theoretically and empirically. Inflation uncertainty that generated from inflation volatility is one of the major cost of inflation that can influence the decision making of economic agents. We can't say that inflation is harmful or useful for an economy but we can say that inflation uncertainty is harmful. Inflation uncertainty has the negative effect on economic variables such as: growth, consumption, investment, money demand and other. The relationship between inflation and inflation uncertainty has attracted considerable attention since the publication of Milton Friedman’s Nobel lecture. Friedman (1977) was the first who formalized the relationship between inflation and inflation uncertainty and He strongly supported the causality link that running from inflation to inflation uncertainty The relationship between inflation and inflation uncertainty has attracted considerable attention since the publication of Milton Friedman’s Nobel lecture. Friedman (1977) was the first who formalized the relationship between inflation and inflation uncertainty and He strongly supported the causality link that running from inflation to inflation uncertainty
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
