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Empirical Regularities of Inflation Volatility: Evidence from Advanced and Developing Countries

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  • Shesadri Banerjee

Abstract

How does volatility of inflation differ across the economies? Addressing this research question, the article undertakes an empirical exercise on monthly consumer price inflation over the sample period of M01, 1958 to M02, 2016 for 41 countries using the generalized autoregressive conditional heteroscedasticity (GARCH) (1, 1) model. The country-level analysis shows a modest difference of conditional volatility of inflation between the advanced and developing economies. However, this difference increases after controlling the country-specific traits by fixed effect panel estimation using generalized methods of moments on the estimated GARCH series. It is observed that, in the long run, the conditional variability of inflation is nearly three and half times greater in developing countries compared to advanced countries. JEL Classification: E10, E30, E31

Suggested Citation

  • Shesadri Banerjee, 2017. "Empirical Regularities of Inflation Volatility: Evidence from Advanced and Developing Countries," South Asian Journal of Macroeconomics and Public Finance, , vol. 6(1), pages 133-156, June.
    • Handle: RePEc:sae:smppub:v:6:y:2017:i:1:p:133-156
    DOI: 10.1177/2277978717695157
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    Cited by:

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    2. Nyoni, Thabani, 2018. "Modeling and Forecasting Inflation in Zimbabwe: a Generalized Autoregressive Conditionally Heteroskedastic (GARCH) approach," MPRA Paper 88132, University Library of Munich, Germany.

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    More about this item

    Keywords

    Inflation volatility; GARCH model; volatility persistence; panel GMM estimation;
    All these keywords.

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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