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Does Higher Inflation Lead to More Inflation Uncertainty? (The case of Iran)

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  • Ahmad Tashkini

    (PhD Student in Tehran University)

Abstract

This article examines the relationship between inflation and inflation-uncertainty in Iranian economy for the period 1369:1 to 1385:3 .The purpose of this study is to test the hypothesis that inflation uncertainty increases at higher levels of inflation. Analysis of this study is based on the generalized autoregressive conditional heteroscedasticity (which allow the conditional variance of the error term to be time-varying). Since this variance is a proxy for inflation uncertainty, a positive relationship between the conditional variance and inflation would be interpreted as an evidence that inflation uncertainty increases with the level of inflation. Our findings indicate that inflation causes inflation uncertainty as there is a significant positive relationship between inflation and inflation uncertainty. According to this result the role of Central Bank of Iran is so crucial in reducing inflation uncertainty by conducting proper policies.

Suggested Citation

  • Ahmad Tashkini, 2007. "Does Higher Inflation Lead to More Inflation Uncertainty? (The case of Iran)," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 12(2), pages 73-87, spring.
    • Handle: RePEc:eut:journl:v:12:y:2007:i:2:p:73
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