IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Tails of Inflation Forecasts and Tales of Monetary Policy

  • Andrade, P.
  • Ghysels, E.
  • Idier, J.

We 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.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.banque-france.fr/uploads/tx_bdfdocumentstravail/DT-407.pdf
Download Restriction: no

Paper provided by Banque de France in its series Working papers with number 407.

as
in new window

Length: 54 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:bfr:banfra:407
Contact details of provider: Postal: Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS
Web page: http://www.banque-france.fr/

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Yuriy Kitsul & Jonathan H. Wright, 2012. "The Economics of Options-Implied Inflation Probability Density Functions," Economics Working Paper Archive 600, The Johns Hopkins University,Department of Economics.
  2. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1997. "Monetary policy shocks: what have we learned and to what end?," Working Paper Series, Macroeconomic Issues WP-97-18, Federal Reserve Bank of Chicago.
  3. Vasco Cúrdia & Marco Del Negro & Daniel L. Greenwald, 2013. "Rare shocks, Great Recessions," Working Paper Series 2013-01, Federal Reserve Bank of San Francisco.
  4. Joseph S. Vavra, 2013. "Inflation Dynamics and Time-Varying Volatility: New Evidence and an Ss Interpretation," NBER Working Papers 19148, National Bureau of Economic Research, Inc.
  5. Giorgio E. Primiceri, 2005. "Time Varying Structural Vector Autoregressions and Monetary Policy," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 821-852.
  6. Francois Gourio, 2012. "Disaster Risk and Business Cycles," American Economic Review, American Economic Association, vol. 102(6), pages 2734-66, October.
  7. Michael B. Devereux & Henry E. Siu, 2007. "State Dependent Pricing And Business Cycle Asymmetries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(1), pages 281-310, 02.
  8. Richard Clarida & Jordi Gali & Mark Gertler, 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," NBER Working Papers 6442, National Bureau of Economic Research, Inc.
  9. Nicholas Bloom, 2007. "The Impact of Uncertainty Shocks," NBER Working Papers 13385, National Bureau of Economic Research, Inc.
  10. Jonathan Wright & Yuriy Kitsul, 2012. "The Economics of Options-Implied Inflation Probability Density Functions," 2012 Meeting Papers 174, Society for Economic Dynamics.
  11. Pablo Guerron & Martin Uribe & Juan Rubio-Ramirez & Jesus Fernandez-Villaverde, 2010. "Risk Matters: The Real Effects of Volatility Shocks," 2010 Meeting Papers 281, Society for Economic Dynamics.
  12. N. Gregory Mankiw & Ricardo Reis & Justin Wolfers, 2003. "Disagreement about Inflation Expectations," Harvard Institute of Economic Research Working Papers 2011, Harvard - Institute of Economic Research.
  13. Christopher A. Sims & Tao Zha, 2004. "Were there regime switches in U.S. monetary policy?," FRB Atlanta Working Paper No. 2004-14, Federal Reserve Bank of Atlanta.
  14. Pesaran, M.H. & Weale, M., 2005. "Survey Expectations," Cambridge Working Papers in Economics 0536, Faculty of Economics, University of Cambridge.
  15. Francisco Javier Ruge-Murcia, 2001. "Inflation Targeting Under Asymmetric Preferences," IMF Working Papers 01/161, International Monetary Fund.
  16. Lutz Kilian & Simone Manganelli, 2008. "The Central Banker as a Risk Manager: Estimating the Federal Reserve's Preferences under Greenspan," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(6), pages 1103-1129, 09.
  17. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
  18. James H. Stock & Mark W. Watson, 2003. "Has the Business Cycle Changed and Why?," NBER Chapters, in: NBER Macroeconomics Annual 2002, Volume 17, pages 159-230 National Bureau of Economic Research, Inc.
  19. Giordani, Paolo & Soderlind, Paul, 2000. "Inflation Forecast Uncertainty," SSE/EFI Working Paper Series in Economics and Finance 384, Stockholm School of Economics, revised 09 Oct 2000.
  20. Clark, Todd E. & West, Kenneth D., 2007. "Approximately normal tests for equal predictive accuracy in nested models," Journal of Econometrics, Elsevier, vol. 138(1), pages 291-311, May.
  21. Athanasios Orphanides, 2001. "Monetary Policy Rules Based on Real-Time Data," American Economic Review, American Economic Association, vol. 91(4), pages 964-985, September.
  22. Hervé Le Bihan & Philippe Andrade, 2010. "Inattentive Professional Forecasters," 2010 Meeting Papers 1144, Society for Economic Dynamics.
  23. White, Halbert & Kim, Tae-Hwan & Manganelli, Simone, 2008. "Modeling autoregressive conditional skewness and kurtosis with multi-quantile CAViaR," Working Paper Series 0957, European Central Bank.
  24. Alejandro Justiniano & Giorgio E. Primiceri, 2006. "The Time Varying Volatility of Macroeconomic Fluctuations," NBER Working Papers 12022, National Bureau of Economic Research, Inc.
  25. Olivier Coibion & Yuriy Gorodnichenko, 2015. "Information Rigidity and the Expectations Formation Process: A Simple Framework and New Facts," American Economic Review, American Economic Association, vol. 105(8), pages 2644-78, August.
  26. Christina D. Romer & David H. Romer, 2004. "A New Measure of Monetary Shocks: Derivation and Implications," American Economic Review, American Economic Association, vol. 94(4), pages 1055-1084, September.
  27. Yuriy Kitsul & Jonathan H. Wright, 2012. "The Economics of Options-Implied Inflation Probability Density Functions," NBER Working Papers 18195, National Bureau of Economic Research, Inc.
  28. García, Juan Angel & Manzanares, Andrés, 2007. "What can probability forecasts tell us about inflation risks?," Working Paper Series 0825, European Central Bank.
  29. Lahiri, Kajal & Sheng, Xuguang, 2008. "Evolution of forecast disagreement in a Bayesian learning model," Journal of Econometrics, Elsevier, vol. 144(2), pages 325-340, June.
  30. Kim, Tae-Hwan & White, Halbert, 2004. "On more robust estimation of skewness and kurtosis," Finance Research Letters, Elsevier, vol. 1(1), pages 56-73, March.
  31. Gianna Boero & Jeremy Smith & KennethF. Wallis, 2008. "Uncertainty and Disagreement in Economic Prediction: The Bank of England Survey of External Forecasters," Economic Journal, Royal Economic Society, vol. 118(530), pages 1107-1127, 07.
  32. 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.
  33. Jens H.E. Christensen & Jose A. Lopez & Glenn D. Rudebusch, 2012. "Extracting Deflation Probability Forecasts from Treasury Yields," International Journal of Central Banking, International Journal of Central Banking, vol. 8(4), pages 21-60, December.
  34. Kevin B. Grier & Mark J. Perry, 2000. "The effects of real and nominal uncertainty on inflation and output growth: some garch-m evidence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(1), pages 45-58.
  35. Zarnowitz, Victor & Lambros, Louis A, 1987. "Consensus and Uncertainty in Economic Prediction," Journal of Political Economy, University of Chicago Press, vol. 95(3), pages 591-621, June.
  36. Jacob A. Mincer & Victor Zarnowitz, 1969. "The Evaluation of Economic Forecasts," NBER Chapters, in: Economic Forecasts and Expectations: Analysis of Forecasting Behavior and Performance, pages 3-46 National Bureau of Economic Research, Inc.
  37. Fountas, Stilianos & Karanasos, Menelaos, 2007. "Inflation, output growth, and nominal and real uncertainty: Empirical evidence for the G7," Journal of International Money and Finance, Elsevier, vol. 26(2), pages 229-250, March.
  38. Burstein, Ariel T., 2006. "Inflation and output dynamics with state-dependent pricing decisions," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1235-1257, October.
  39. Joseph Engelberg & Charles F. Manski & Jared Williams, 2006. "Comparing the Point Predictions and Subjective Probability Distributions of Professional Forecasters," NBER Working Papers 11978, National Bureau of Economic Research, Inc.
  40. Andrew Atkeson & Lee E. Ohanian., 2001. "Are Phillips curves useful for forecasting inflation?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-11.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:bfr:banfra:407. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael brassart)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.