On the relationship between inflation rate and inflation uncertainty

An application of the GARCH family models

Abu Hassan Shaari Md Nor, Tan Yan Ling, Fauziah Maarof

Research output: Contribution to journalArticle

Abstract

The main objective of this paper is to explore the varying volatility dynamic of inflation rate in Malaysia for the period from January 1980 to December 2004. The GARCH, GARCH-Mean, EGARCH and EGARCH-Mean models are used to capture the stochastic variation and asymmetries in the economic instruments. Results show that the EGARCH model gives better estimates of sub-periods volatility. Further analysis using Granger causality test shows that there is sufficient empirical evidence that higher inflation rate level will result in higher future inflation uncertainty and higher level of inflation uncertainty will lead to lower future inflation rate.

Original languageEnglish
Pages (from-to)225-232
Number of pages8
JournalSains Malaysiana
Volume36
Issue number2
Publication statusPublished - Dec 2007

Fingerprint

Inflation uncertainty
Generalized autoregressive conditional heteroscedasticity
Inflation rate
Asymmetry
EGARCH model
Granger causality test
Malaysia
Economic instruments
High inflation
Empirical evidence

Keywords

  • GARCH
  • Granger Causality
  • Inflation rate
  • Volatility dynamic

ASJC Scopus subject areas

  • General

Cite this

On the relationship between inflation rate and inflation uncertainty : An application of the GARCH family models. / Md Nor, Abu Hassan Shaari; Ling, Tan Yan; Maarof, Fauziah.

In: Sains Malaysiana, Vol. 36, No. 2, 12.2007, p. 225-232.

Research output: Contribution to journalArticle

Md Nor, Abu Hassan Shaari ; Ling, Tan Yan ; Maarof, Fauziah. / On the relationship between inflation rate and inflation uncertainty : An application of the GARCH family models. In: Sains Malaysiana. 2007 ; Vol. 36, No. 2. pp. 225-232.
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