The Linkages between Inflation and Inflation Uncertainty in Selected Asian Economies: Evidence from Quantile Regression
This paper examines inflation-inflation uncertainty nexus in both inflation targeting and non-inflation targeting economies in Asia. Using monthly data from 1979M1 to 2019M12, the AR(p)-EGARCH model is used to generate inflation uncertainty series. In addition, quantile regression is employed to examine the linkages between inflation and inflation uncertainty in nine Asian countries. The results show that inflation positively causes inflation uncertainty in all economies regardless of whether economies have implemented inflation targeting or not. The Friedman-Ball hypothesis is thus supported. In addition, inflation uncertainty positively causes inflation in most economies. Therefore, the Cukierman-Meltzer hypothesis is likely to be supported. The findings signal the possibility of the real cost of inflation for these economies.
 Ball, L. 1992. Why does high inflation raise inflation uncertainty? Journal of Monetary Economics, 29(3): 371-388. DOI: https://doi.org/10.1016/0304-3932(92)90032-W
 Caporale, G.M., and Kontonikas, A. 2009. The Euro and inflation uncertainty in the European Monetary Union. Journal of International Money and Finance 28(6): 954-971. DOI: https://doi.org/10.1016/j.jimonfin.2008.09.004
 Chen, S-W., Shen, C-H., and Xie, Z. 2008. Evidence of a nonlinear relationship between inflation and inflation uncertainty: the case of the four little dragons. Journal of Policy Modeling 30(2): 363-376. DOI: https://doi.org/10.1016/j.jpolmod.2007.01.007
 Chowdhury, A. 2014. Inflation and inflation uncertainty in India: the policy implications of the relationship. Journal of Economic Studies, 41(1): 71-86. DOI: https://doi.org/10.1108/JES-04-2012-0046
 Chowdhury, K.B., Sarkar, N. 2015. The effect of inflation on inflation uncertainty in the G7 countries: a double threshold GARCH model. International Econometric Review, 7(1): 34-50. DOI: 10. 33818/ier.278039
 Cukierman, A., Meltzer, A. 1986. A theory of ambiquity, credibility, and inflation under discretion and asymmetric information. Econometrica, 54(5): 1099-1128. DOI: 10.2307/1912324
 Daal, E., Naka, A., Sanchez, B. 2005. Re-examining inflation and inflation uncertainty in developed and developing countries. Economics Letters, 89(2): 180-186. DOI: https://doi.org/10.1016/j.econlet.2005.05.024
 Fountas, S., and Karanasos, M. 2007. Inflation, output growth, and nominal and real uncertainty: empirical evidence for the G7. Journal of international Money and Finance, 26(2): 229-250.
 Friedman, M. 1977. Nobel lecture: inflation and unemployment. Journal of Political Economy, 85(3): 451-472. DOI: https://www.journals.uchicago.edu/doi/10.1086/260579
 Gerlach, S., Tillman, P. 2012. Inflation targeting and inflation persistence in Asia-Pacific. Journal of Asian Economics, 23(4): 360-373. DOI: https://doi.org/10.1016/j.asieco.2012.03.002
 Grier, K., Perry, M.J. 1998. On inflation and inflation uncertainty in the G7 countries. Journal of International Money and Finance, 17(4): 671-689. DOI: https://doi.org/10.1016/S0261-5606(98)00023-0
 Holland, A.S. 1995. Inflation and uncertainty: tests for temporal ordering. Journal of Money, Credit and Banking, 27(3): 827-837. DOI: 10.2307/2077753
 Jiranyakul, K., Opiela, T.P. 2010. Inflation and inflation uncertainty in the ASEAN-5 economies. Journal of Asian Economics, 21(2): 105-112. DOI: https://doi.org/10.1016/j.asieco.2009.09.007
 Koenker, R., and Hallock, K. 2001. Quantile Regression. Journal of Economic Perspectives: 15(4): 143-156. DOI: 10.1257/jep.15.4.143
 Kontonikas, A. 2004. Inflation and inflation uncertainty in the United Kingdom, evidence from GARCH modeling. Economic Modelling, 21(3): 525-543. DOI: https://doi.org/10.1016/j.econmod.2003.08.001
 Mohd, S.H., Baharumshah, A.Z., Fountas, S. 2013. Inflation, inflation uncertainty and output growth: Recent evidence from ASEAN-5 countries. Singapore Economic Review, 58(4): 1-17.
 Nasr, A.B., et al. 2015. Causality between inflation and inflation uncertainty in South Africa: evidence from a Markov-switching vector autoregressive model. Emerging Markets Review, 24(C): 46-68. DOI: https://doi.org/10.1016/j.ememar.2015.05.003
 Nelson, D.B. 1991. Conditional heteroskedasticity in asset returns: a new approach. Econometrica, 59(2): 347-370. DOI: https://doi.org/0012-9682(199103)59:2<347:CHIARA>2.0.CO;2-V
 Su, C-W., Yu, H., Chang, H-L., Li, X-L. 2017. How does inflation determine inflation uncertainty? A Chinese perspective. Quality and Quantity: International Journal of Methodology, 51(3): 1417-1434. DOI: https://doi.org/10.1007/s11135-016-0341-2
 Zivkov, D., Njegic, J., Pecanac, M. 2014. Bidirectional linkage between Inflation and inflation uncertainty – the case of Eastern European countries. Baltic Journal of Economics, 14 (1-2): 124-139.
The Copyright Transfer Form to ASERS Publishing (The Publisher)
This form refers to the manuscript, which an author(s) was accepted for publication and was signed by all the authors.
The undersigned Author(s) of the above-mentioned Paper here transfer any and all copyright-rights in and to The Paper to The Publisher. The Author(s) warrants that The Paper is based on their original work and that the undersigned has the power and authority to make and execute this assignment. It is the author's responsibility to obtain written permission to quote material that has been previously published in any form. The Publisher recognizes the retained rights noted below and grants to the above authors and employers for whom the work performed royalty-free permission to reuse their materials below. Authors may reuse all or portions of the above Paper in other works, excepting the publication of the paper in the same form. Authors may reproduce or authorize others to reproduce the above Paper for the Author's personal use or for internal company use, provided that the source and The Publisher copyright notice are mentioned, that the copies are not used in any way that implies The Publisher endorsement of a product or service of an employer, and that the copies are not offered for sale as such. Authors are permitted to grant third party requests for reprinting, republishing or other types of reuse. The Authors may make limited distribution of all or portions of the above Paper prior to publication if they inform The Publisher of the nature and extent of such limited distribution prior there to. Authors retain all proprietary rights in any process, procedure, or article of manufacture described in The Paper. This agreement becomes null and void if and only if the above paper is not accepted and published by The Publisher, or is with drawn by the author(s) before acceptance by the Publisher.