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Inflation at risk in advanced and emerging economies

Author

Listed:
  • Ryan Niladri Banerjee
  • Juan Contreras
  • Aaron Mehrotra
  • Fabrizio Zampolli

Abstract

We examine how inflation risks have changed over time in a large panel of advanced and emerging market economies (EMEs). Quantile regressions show a general decline in upside inflation risks over time, reflecting successful disinflationary processes and the adoption of inflation targeting regimes. But important non-linearities remain. In advanced economies, the zero lower bound represents a prominent source of downside inflation risk. In EMEs, the exchange rate remains a powerful source of nonlinearity, with large exchange rate depreciations associated with upside inflation risks. Tightening financial conditions increase both up- and downside inflation risks.

Suggested Citation

  • Ryan Niladri Banerjee & Juan Contreras & Aaron Mehrotra & Fabrizio Zampolli, 2020. "Inflation at risk in advanced and emerging economies," BIS Working Papers 883, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:883
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    References listed on IDEAS

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    Cited by:

    1. Dubravko Mihaljek, 2021. "Interactions between fiscal and monetary policies: a brief history of a long relationship," Public Sector Economics, Institute of Public Finance, vol. 45(4), pages 419-432.
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    3. Michael Gurkov & Osnat Zohar, 2022. "Inflation Risks in Israel," Bank of Israel Working Papers 2022.19, Bank of Israel.
    4. Tony Chernis & Patrick J. Coe & Shaun P. Vahey, 2023. "Reassessing the dependence between economic growth and financial conditions since 1973," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 38(2), pages 260-267, March.
    5. Michal Franta & Jan Libich, 2021. "Holding the Economy by the Tail: Analysis of Short- and Long-run Macroeconomic Risks," Working Papers 2021/3, Czech National Bank.

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    More about this item

    Keywords

    inflation risk; monetary policy framework; zero lower bound; inflation targeting;
    All these keywords.

    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
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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