Time and Frequency Co-Movement between Economic Policy Uncertainty and Inflation: Evidence from Japan

journal of Public Affairs, Forthcoming

24 Pages Posted: 2 Jan 2023

See all articles by Seyed Alireza Athari

Seyed Alireza Athari

Cyprus International University; Eastern Mediterranean University - Department of Banking and Finance; Girne American University; Cyprus International University

Dervis Kirikkaleli

European University of Lefke - Department of Banking and Finance

Imran Yousaf

Namal University

Shoaib Ali

Air University - Islamabad

Date Written: December 13, 2022

Abstract

This study examines the time-frequency causal link between economic policy uncertainty and inflation in Japan while answering the following questions: (i) is there any causal link between economic policy uncertainty and inflation in Japan? (ii) if yes, in which direction(s)? To the best of our knowledge, this is the first study that conducts this nexus. To do so, this study employs the wavelet coherence causality test and focuses on the wide range period from 2003:03 to 2021:03, in which Japan was experienced the specific Quantitative and Qualitative Monetary Easing Policies. Overall, the findings mirror that economic policy uncertainty is an essential predictor of inflation in Japan, and economic policy uncertainty leads to inflation at different periods and frequencies. The results of this study are crucial for policy decision-making, monetary authorities, and central banks, and Japan should reduce uncertainty about economic policies to curb the possible risk of inflation rises. The policymakers in Japan can control the inflation rate fluctuation if they can ensure a more reliable prediction of economic policies.

Keywords: economics policy uncertainty, inflation, Japan, wavelet coherence

Suggested Citation

Athari, Seyed Alireza and Kirikkaleli, Dervis and Yousaf, Imran and Ali, Shoaib, Time and Frequency Co-Movement between Economic Policy Uncertainty and Inflation: Evidence from Japan (December 13, 2022). journal of Public Affairs, Forthcoming , Available at SSRN: https://ssrn.com/abstract=4300742

Seyed Alireza Athari (Contact Author)

Cyprus International University ( email )

Nicosia, North Cyprus
Turkey

Eastern Mediterranean University - Department of Banking and Finance ( email )

Fmagusta North Cyprus, via Mersin-10
Turkey

Girne American University ( email )

Faculty of Architecture
Girne American University(GAU)
Girne(Kyrenia), Via Mersin-10 99428
Cyprus

Cyprus International University ( email )

Nicosia
Nicosia
Cyprus

Dervis Kirikkaleli

European University of Lefke - Department of Banking and Finance ( email )

Turkey

Imran Yousaf

Namal University

30km Mianwali-Talagang road
Mianwali, Punjab 42250
Pakistan

Shoaib Ali

Air University - Islamabad ( email )

Service Road E-9
Islamabad, 44000
Pakistan

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