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Tails of Inflation Forecasts and Tales of Monetary Policy

Listed author(s):
  • 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.

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File URL: https://publications.banque-france.fr/sites/default/files/medias/documents/working-paper_407_2012.pdf
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Paper provided by Banque de France in its series Working papers with number 407.

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Length: 54 pages
Date of creation: 2012
Handle: RePEc:bfr:banfra:407
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Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS

Web page: http://www.banque-france.fr/

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