Tails of Inflation Forecasts and Tales of Monetary Policy
AbstractWe introduce a new measure called Inflation-at-Risk (I@R) associated with (left and right) tail inflation risk. We estimate I@R using survey-based density forecasts. We show that it contains information not covered by usual inflation risk indicators which focus on inflation uncertainty and do not distinguish between the risks of low or high future inflation outcomes. Not only the extent but also the asymmetry of inflation risks evolve over time. Moreover, changes in this asymmetry have an impact on future inflation realizations as well as on the current interest rate central banks target.
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Bibliographic InfoPaper provided by Banque de France in its series Working papers with number 407.
Length: 54 pages
Date of creation: 2012
Date of revision:
inflation expectations; risk; uncertainty; survey data; inflation dynamics; monetary policy.;
Find related papers by JEL classification:
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-12-10 (All new papers)
- NEP-CBA-2012-12-10 (Central Banking)
- NEP-ECM-2012-12-10 (Econometrics)
- NEP-FOR-2012-12-10 (Forecasting)
- NEP-MAC-2012-12-10 (Macroeconomics)
- NEP-MON-2012-12-10 (Monetary Economics)
- NEP-RMG-2012-12-10 (Risk Management)
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- Rossi, Barbara & Sekhposyan, Tatevik, 2013.
"Conditional predictive density evaluation in the presence of instabilities,"
Journal of Econometrics,
Elsevier, vol. 177(2), pages 199-212.
- Barbara Rossi & Tatevik Sekhposyan, 2013. "Conditional predictive density evaluation in the presence of instabilities," Economics Working Papers 1368, Department of Economics and Business, Universitat Pompeu Fabra.
- Barbara Rossi & Tatevik Sehkposyan, 2013. "Conditional Predictive Density Evaluation in the Presence of Instabilities," Working Papers 688, Barcelona Graduate School of Economics.
- Kenny, Geoff & Kostka, Thomas & Masera, Federico, 2013. "Can macroeconomists forecast risk? Event-based evidence from the euro area SPF," Working Paper Series 1540, European Central Bank.
- Robert Rich & Joseph Song & Joseph Tracy, 2012. "The measurement and behavior of uncertainty: evidence from the ECB Survey of Professional Forecasters," Staff Reports 588, Federal Reserve Bank of New York.
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