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On the relationship between inflation rate and inflation uncertainty: an application of the GARCH family models

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 instrument...

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Main Authors: Mohd Nor, Abu Hassan Shaari, Tan, Yan Ling, Maarof, Fauziah
Format: Article
Language:English
Published: Penerbit Universiti Kebangsaan Malaysia 2007
Online Access:http://psasir.upm.edu.my/id/eprint/28159/1/On%20the%20relationship%20between%20inflation%20rate%20and%20inflation%20uncertainty%20an%20application%20of%20the%20GARCH%20family%20models.pdf
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id oai:psasir.upm.edu.my:28159
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spelling oai:psasir.upm.edu.my:28159 http://psasir.upm.edu.my/id/eprint/28159/ On the relationship between inflation rate and inflation uncertainty: an application of the GARCH family models Mohd Nor, Abu Hassan Shaari Tan, Yan Ling Maarof, Fauziah 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 show 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. Penerbit Universiti Kebangsaan Malaysia 2007 Article PeerReviewed application/pdf en http://psasir.upm.edu.my/id/eprint/28159/1/On%20the%20relationship%20between%20inflation%20rate%20and%20inflation%20uncertainty%20an%20application%20of%20the%20GARCH%20family%20models.pdf Mohd Nor, Abu Hassan Shaari and Tan, Yan Ling and Maarof, Fauziah (2007) On the relationship between inflation rate and inflation uncertainty: an application of the GARCH family models. Sains Malaysiana, 36 (2). pp. 225-232. ISSN 0126-6039 http://www.ukm.my/jsm/english_journals/vol36num2_2007/vol36num2_07page225-232.html
institution UPM IR
collection UPM IR
language English
description 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 show 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.
format Article
author Mohd Nor, Abu Hassan Shaari
Tan, Yan Ling
Maarof, Fauziah
spellingShingle Mohd Nor, Abu Hassan Shaari
Tan, Yan Ling
Maarof, Fauziah
On the relationship between inflation rate and inflation uncertainty: an application of the GARCH family models
author_facet Mohd Nor, Abu Hassan Shaari
Tan, Yan Ling
Maarof, Fauziah
author_sort Mohd Nor, Abu Hassan Shaari
title On the relationship between inflation rate and inflation uncertainty: an application of the GARCH family models
title_short On the relationship between inflation rate and inflation uncertainty: an application of the GARCH family models
title_full On the relationship between inflation rate and inflation uncertainty: an application of the GARCH family models
title_fullStr On the relationship between inflation rate and inflation uncertainty: an application of the GARCH family models
title_full_unstemmed On the relationship between inflation rate and inflation uncertainty: an application of the GARCH family models
title_sort on the relationship between inflation rate and inflation uncertainty: an application of the garch family models
publisher Penerbit Universiti Kebangsaan Malaysia
publishDate 2007
url http://psasir.upm.edu.my/id/eprint/28159/1/On%20the%20relationship%20between%20inflation%20rate%20and%20inflation%20uncertainty%20an%20application%20of%20the%20GARCH%20family%20models.pdf
_version_ 1819295102926848000
score 13.4562235

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