The Nexus between Inflation and Inflation Uncertainty of four South Asian Economies

Abstract

This study data have been taken from World Bank side during the time span from 1989 to 2016. This study explores the relationship between inflation and inflation uncertainty in Pakistan, India, Sri Lanka, and Bangladesh. The EGARCH model is used to check the inflation uncertainty among four countries. The asymmetric behavior of inflation uncertainty has also been found by this method. The granger causality test is used to check the direction between inflation and inflation uncertainty. The result of this study showed that there were positive shocks among all the developing countries such as Pakistan, India, Sri Lanka, and Bangladesh. The results of Granger Causality test showed that bi-directional causality exists between inflation and inflation uncertainty in south Asian economies.