Abstract:

It is based on the Friedman-Ball and Cukierman-Meltzer hypotheses theoretical foundations of the relationship between inflation and inflation uncertainty discussions. Friedman-Ball hypothesis shows an increase in inflation as the cause of inflation uncertainty. Cukierman-Meltzer hypothesis expresses the uncertainty of inflation as the reason for the increase in inflation. Although the two approaches differ from each other in terms of the causality of the relationship in question. Both of these approaches base the relationship between inflation and inflation uncertainty on the central bank's monetary policy behavior. In this context, it is expected to contribute to the literature both in terms of theoretical discussions and econometric practice of this paper. This study aimed to examine the relationship between inflation and inflation uncertainty in Turkish economy during the period 2008-2019. In this context, inflation uncertainty series was obtained Autoregressive Moving Average-Exponential Generalized Autoregressive Conditional Variance modeling is applied quarterly consumer price index inflation rate series of Turkey's for the period 2008-2019. The relationship between inflation and inflation uncertainty has been estimated using Dynamic Ordinary Least Squares method. Then, Vector Autoregressive Model Granger causality test method was applied. Dynamic Ordinary Least Squares estimation results reveal that inflation uncertainty positively affects inflation in Turkish economy during the period 2008-2019. Vector Autoregressive Model Granger causality test results show that inflation has an effect on inflation uncertainty in Turkish economy for the specified period. Obtained econometric results revealed that Friedman-Ball and Cukierman-Meltzer hypotheses were valid in Turkish economy.

Keywords: