Inflation and Inflation Uncertainty in Iran: An Application of GARCH-in-Mean Model with FIML Method of Estimation

	Inflation and Inflation Uncertainty in Iran: An Application of GARCH-in-Mean Model with FIML Method of Estimation
International Journal of Business and Development Studies
مقاله 6، دوره 2، شماره 1، اسفند 2010، صفحه 131-146 اصل مقاله (137.54 K)
نوع مقاله: Research Paper
شناسه دیجیتال (DOI): 10.22111/ijbds.2010.1303
چکیده
This paper investigates the relationship between inflation and inflation uncertainty for the period of 1990-2009 by using monthly data in the Iranian economy. The results of a two-step procedure such as Granger causality test which uses generated variables from the first stage as regressors in the second stage, suggests a positive relation between the mean and the variance of inflation. However, Pagan (1984) criticizes this two-step procedure for its misspecifications due to the use of generated variables from the first stage as regressors in the second stage. This paper uses the Full Information Maximum Likelihood (FIML) method to address this issue. The estimates we gathered with the new set of specifications suggest that inflation causes inflation uncertainty, supporting the Friedman–Ball hypothesis.
کلیدواژه‌ها
Inflation Uncertainty؛ GARCH models؛ FIML؛ Iran

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