Inflation Uncertainty and Inflation in the Case of Romania, Czech Republic, Hungary, Poland and Turkey

Using monthly inflation data spanning from 1996 to 2012 we test the influence between inflation uncertainty [IU] and inflation, the inflation is modeled using the GARCH family models: GARCH, asymmetric GARCH and GARCH in Mean with different distribution, checking for any structural break in the series using the Zivot-Andrews test and PELT algorithm, the structural breaks in mean and variance are captured using dummy variables in the GARCH models, we identify the best models using the informational criterion (Akaike, Schwarz, Log-likelihood). The inflation uncertainty proxy is the conditional volatility from the GARCH family models and the influence between inflation uncertainty and inflation is tested using Granger causality. (C) 2014 The Authors. Published by Elsevier B.V.