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Inflation and Inflation Uncertainty in North Macedonia: A GARCH Model Approach

In: Economic Resilience and Sustainability - Vol. 2

Author

Listed:
  • Murat Sadiku

    (South East European University, Faculty of Business and Economics)

  • Luljeta Sadiku

    (International Balkan University, Faculty of Economics and Administrative Sciences)

Abstract

Understanding inflation uncertainty is crucial for designing effective monetary policy, particularly in small and open economies such as North Macedonia. Therefore, the main purpose of this study is to analyze the volatility of inflation serving as a proxy for inflation uncertainty. Employing the Generalized Autoregressive Conditional Heteroscedasticity (GARCH) model and using monthly data from January 2002 to March 2025, inflation uncertainty is observed by the volatility in time series allowing for a dynamic examination of how inflation uncertainty has evolved under the current monetary regime. Also, the relationship between inflation and inflation uncertainty is examined using the Granger causality test. The results confirm that inflation volatility is persistent over time, justifying the use of GARCH model. While causality tests suggest a bi-directional relationship.

Suggested Citation

  • Murat Sadiku & Luljeta Sadiku, 2026. "Inflation and Inflation Uncertainty in North Macedonia: A GARCH Model Approach," Springer Proceedings in Business and Economics, in: Abdylmenaf Bexheti & Veland Ramadani & Hyrije Abazi-Alili & Christina Theodoraki & Gadaf Rexhepi & B (ed.), Economic Resilience and Sustainability - Vol. 2, chapter 0, pages 317-326, Springer.
    • Handle: RePEc:spr:prbchp:978-3-032-04214-9_20
    DOI: 10.1007/978-3-032-04214-9_20
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