engleski

Hedging against inflation in Croatia: A wavelet based analysis

There is no consensus among researchers about effective hedging against inflation. Stocks, gold, fixed income securities and real estate are the major asset classes tested as hedging instruments against inflation over the globe. This paper summarizes previous findings and related methodological approaches. Furthermore, the main aim of the research is to examine possibilities of hedging against inflation in Croatia on Zagreb Stock Exchange. Using data samples from January 2000 up to September 2019, the research examines various indexes against inflation, namely CROBEX, CROBEX10, CROBIS and CROBIStr. Besides traditional empirical approaches, the research follows wavelet based approach and provide useful insights into the topic from time and frequency domain. Wavelet coherence analysis portrays results depending on time and frequency domain, enabling the relationship between considered variables to differ depending on time and frequency of the observed time series. The results point out that investments on the Croatian capital market could hardly serve as hedging strategy against inflation in Croatia. The results call for further research and results from other small and open economies. Inflation might be significantly determined from abroad while in case of capital market the drivers might be more internal.

inflation, hedging, wavelet based approach

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