Asymmetry Effect of Inflation on Inflation Uncertainty in Iran: Using from EGARCH Model, 1959-2009
Dahmardeh Nazar, Pourshahabi Farshid and Khani Zade Amiri Mojtaba
DOI : 10.3844/ajassp.2010.535.539
American Journal of Applied Sciences
Volume 7, Issue 4
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.
© 2010 Dahmardeh Nazar, Pourshahabi Farshid and Khani Zade Amiri Mojtaba. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.