Abstract:

This study questioned the existence and direction of the causal relationship between inflation and inflation uncertainty in Turkey for the period 1982-2008. The analysis of the causality between the variance series and the inflation series, obtained from the ARCH, GARCH and PARCH forecasts on the autoregressive inflation models, supports the conclusion that high inflation in Turkey increases inflation uncertainty. In addition, it is also concluded that short-term inflation uncertainty is the cause of high inflation. This outcome can be interpreted as an indicator of the tendency of the central bank to apply to inflation surprises in the short term.