BIDIRECTIONAL LINKAGE between inflation and inflation uncertainty:  case of Serbia

Siniša Miletić; Jovanka Popović

doi:10.59864/Oditor12501SM

Authors

Siniša Miletić Faculty of Management, Union NikolaTesla University, Njegoševa 1a, Sremski Karlovci, Serbia Author
Jovanka Popović Dositej School of Academic Studies, Belgrade Author

DOI:

https://doi.org/10.59864/Oditor12501SM

Keywords:

inflation, inflation uncertainty, GARCH models, Friedman-Ball hypothesis, Cukierman-Meltzer hypothesis

Abstract

The aim of this study is to analyze the relationship between inflation and inflation uncertainty in Serbia. Using the GARCH model, inflation uncertainty was assessed with the EGARH model proving to be the best model. The results of the Granger causality test between inflation and inflation uncertainty showed that inflation affects the growth of inflation uncertainty in the case of Serbia and that the growth of inflation leads to the growth of uncertainty, thus confirming the Friedman-Ball hypothesis. On the other hand, the results showed that inflation uncertainty affects the growth of inflation and that the growth of inflation uncertainty affects the growth of inflation in the case of Serbia which is in accordance with Cukierman and Meltzer's hypothesis.

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