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Modelling Inflation Uncertainty In Transition Economies:The Case Of Russia And The Former Soviet Republics

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  • Serkan Erkam
  • Tarkan Cavusoglu

Abstract

This study investigates the linkage between inflation and inflation-uncertainty in seven transitional economies ( Armenia , Azerbaijan , Georgia , Kazakhstan , the Kyrgyz Republic , the Russian Federation and the Ukraine ) which experienced hyper-inflation until the mid-1990s. This linkage is investigated in the ARCH modelling framework by using both conventional Granger non-causality testing and the Holmes-Hutton approach, which has significant small- and large-sample power advantages over the former. The results support the Friedman-Ball hypothesis in Azerbaijan , the Russian Federation and the Ukraine . The Cukierman-Meltzer hypothesis is favoured in the Kyrgyz Republic and in the Russian Federation using a different model. In Azerbaijan , greater inflation uncertainty preceded lower rates of inflation, indicative of the strong monetary stabilization policies pursued in this economy.

Suggested Citation

  • Serkan Erkam & Tarkan Cavusoglu, 2008. "Modelling Inflation Uncertainty In Transition Economies:The Case Of Russia And The Former Soviet Republics," Economic Annals, Faculty of Economics, University of Belgrade, vol. 53(178-179), pages 44-71, July - De.
  • Handle: RePEc:beo:journl:v:53:y:2008:i:178-179:p:44-71
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    More about this item

    Keywords

    Inflation; inflationuncertainty; Granger-causality; conditional variance;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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