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Inflation and inflation uncertainty in Ghana

Author

Listed:
  • Eric Fosu Oteng-Abayie

    (Department of Economics, Kwame Nkrumah University of Science and Technology, Ghana)

  • Samuel Kwame Doe

    (Department of Economics, Kwame Nkrumah University of Science and Technology, Ghana)

Abstract

The study investigates the relationship between inflation and inflation uncertainty for the period 1984-2011. The work uses the monthly Consumer Price Index to proxy inflation. The General Autoregressive Heteroscedasticity (GARCH) model is employed to estimate the conditional variability of inflation. The work uses two approaches to find out the relationship between inflation and inflation uncertainty. The first one is the two-step procedure of Granger causality test, which obtains generated variables in stage one as dependent variable in the second stage. The second procedure involves inclusion of conditional variance and inflation in the mean and conditional variance equations respectively, and Full Information Maximum Likelihood (FIML) technique is used in the estimation of the two equations. The two methods established the same result that in high inflationary periods, inflation uncertainty also rises and that inflation uncertainty causes inflation, which is in support of Cukierman-Meltzer hypothesis. Therefore, decreasing inflation uncertainty is expected to reduce inflation.

Suggested Citation

  • Eric Fosu Oteng-Abayie & Samuel Kwame Doe, 2013. "Inflation and inflation uncertainty in Ghana," E3 Journal of Business Management and Economics., E3 Journals, vol. 4(12), pages 259-266.
    • Handle: RePEc:etr:series:v:4:y:2013:i:12:p:259-266
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    Citations

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    Cited by:

    1. Nasr, Adnen Ben & Balcilar, Mehmet & Ajmi, Ahdi N. & Aye, Goodness C. & Gupta, Rangan & van Eyden, Reneé, 2015. "Causality between inflation and inflation uncertainty in South Africa: Evidence from a Markov-switching vector autoregressive model," Emerging Markets Review, Elsevier, vol. 24(C), pages 46-68.
    2. Jiranyakul, Komain, 2014. "Does oil price uncertainty transmit to the Thai stock market?," MPRA Paper 57262, University Library of Munich, Germany.
    3. Jiranyakul, Komain, 2014. "Does oil price uncertainty transmit to the Thai stock market?," MPRA Paper 57350, University Library of Munich, Germany.
    4. Komain Jiranyakul, 2014. "Does oil price uncertainty transmit to the Thai stock market?," Journal of Economic and Financial Studies (JEFS), LAR Center Press, vol. 2(6), pages 16-25, December.
    5. Alimi, R. Santos, 2017. "Association between inflation rates and inflation uncertainty in quantile regression," MPRA Paper 79683, University Library of Munich, Germany.

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