Inflation Targeting and Inflation Uncertainty

Authors

  • Bedri Kamil Onur Taş

    1. TOBB University of Economics and Technology.More detailed results – that are country specific and for different specifications of the model – are available on request from the author in an additional appendix.
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  • More detailed results – that are country specific and for different specifications of the model – are available on request from the author in an additional Appendix.

Abstract

This article empirically investigates the impact of inflation targeting on inflation uncertainty. We implement PARCH and GARCH methodologies to model conditional variance of inflation. We also investigate the relationship between level and volatility of inflation to analyze the validity of the Friedman hypothesis for IT countries. We find that most of the inflation targeting countries have significantly lower inflation variances after inflation targeting. In most of the IT countries, the relationship is consistent with the Friedman hypothesis.

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