Share:


Inflation, inflation uncertainty and growth in the Iranian economy: an application of BGARCH-M model with BEKK approach

    Hassan Heidari Affiliation
    ; Salih Turan Katircioglu Affiliation
    ; Sahar Bashiri Affiliation

Abstract

This paper investigates the relationship between inflation, economic growth and their respective uncertainties in Iran for the period of 1988–2008 by using quarterly data. We employ a Bivariate Generalized Autoregressive Conditional Heteroskedasticity-in-Mean (BGARCH-M) model to examine in a unified empirical framework all the possible interactions between inflation uncertainty and growth in Iran. The model is simultaneously estimated by using the maximum log-likelihood method with the BEKK approach. The main findings of the present study are: (1) Inflation causes inflation uncertainty, supporting the Friedman-Ball hypothesis. (2) Inflation uncertainty affects the level of economic growth, supporting the Friedman (1977) hypothesis. (3) Growth uncertainty does not affect the level of economic growth, supporting the Friedman (1968) hypothesis. (4) And finally our empirical evidence shows that growth uncertainty affects the level of inflation, supporting the Deveraux (1989) hypothesis.

Keyword : inflation uncertainty, growth uncertainty, BGARCH-M, BEKK approach, Iran

How to Cite
Heidari, H., Katircioglu, S. T., & Bashiri, S. (2013). Inflation, inflation uncertainty and growth in the Iranian economy: an application of BGARCH-M model with BEKK approach. Journal of Business Economics and Management, 14(5), 819-832. https://doi.org/10.3846/16111699.2012.670134
Published in Issue
Nov 6, 2013
Abstract Views
357
PDF Downloads
256
Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.