The financial content of inflation risks in the euro area
AbstractRecent studies emphasize that survey-based inflation risk measures are informative about future inflation and thus useful for monetary authorities. However, these data are typically available at a quarterly frequency whereas monetary policy decisions require a more frequent monitoring of such risks. Using the ECB survey of professional forecasters, we show that high-frequency financial market data have predictive power for the low-frequency survey-based inflation risk indicators observed at the end of a quarter. We rely on MIDAS regressions to handle the problem of mixing data with different frequencies that such an analysis implies. We also illustrate that upside and downside risks react differently to financial indicators.
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Bibliographic InfoPaper provided by Banque de France in its series Working papers with number 437.
Length: 35 pages
Date of creation: 2013
Date of revision:
inflation forecasts; inflation risk; survey data; financial data; MIDAS regression.;
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
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
- C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-08-05 (All new papers)
- NEP-CBA-2013-08-05 (Central Banking)
- NEP-EEC-2013-08-05 (European Economics)
- NEP-FOR-2013-08-05 (Forecasting)
- NEP-MAC-2013-08-05 (Macroeconomics)
- NEP-MON-2013-08-05 (Monetary Economics)
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