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Inflation, Inflation Instability and Nominal Uncertainty in Bulgarian Economy

Author

Listed:
  • Tsvetomir Tsvetkov
  • Sonya Georgieva

Abstract

The main goal of the paper is to assess the relationship between inflation, inflation instability and nominal uncertainty in the Bulgarian economy in January 2000 – May 2022. Employing the ARCH model, GARCH-M model, EGARCH model and Granger Causality Test we find a two-way causal relationship between inflation and inflation instability. Initially, inflation provokes inflation instability, and inflation instability provokes inflation consequently. Nominal uncertainty is measured by wavelet analysis, which establishes the presence of nominal uncertainty in the Bulgarian economy. Therefore, at certain lags, the inflation instability is transformed into nominal uncertainty. The empirical evidence raises the question of the effectiveness of the Currency Board Arrangements in Bulgaria.

Suggested Citation

  • Tsvetomir Tsvetkov & Sonya Georgieva, 2022. "Inflation, Inflation Instability and Nominal Uncertainty in Bulgarian Economy," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 8, pages 41-64.
    • Handle: RePEc:bas:econst:y:2022:i:8:p:41-64
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    References listed on IDEAS

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    Cited by:

    1. Darko Lazarov & Kiril Simeonovski, 2023. "Macroeconomic Stability and Economic Growth: An Empirical Estimation for North Macedonia," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 8, pages 78-94.
    2. Dimitar Zlatinov & Stoyan Shalamanov, 2023. "Economic Policy in the Years of Economic Transition and the European Union Membership in Bulgaria," Proceedings of the Centre for Economic History Research, Centre for Economic History Research, vol. 8, pages 222-235, November.

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    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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