Inflation at Risk: The Czech Case

Michal Franta and Jan Vlcek

Working Papers from Czech National Bank, Research and Statistics Department

Abstract: Inflation at Risk provides a coherent description of the risks associated with an inflation outlook. This paper explores the practical applicability of this approach in central banks. The method is applied to Czech inflation to highlight issues related to short data sample. A set of quantile regressions with a non-crossing quantiles constraint is estimated using monthly data from the year 2000 onwards, and the model's in-sample fit and out-of-sample forecasting performance are then assessed. Furthermore, we discuss the Inflation at Risk estimates in the context of several historical events and demonstrate how the approach can inform monetary policy. The estimation results suggest the presence of nonlinearities in the Czech inflation process, which are related to supply-side pressures. In addition, it appears that regime changes have occurred recently.

Keywords: Inflation dynamics; inflation risk; quantile regressions (search for similar items in EconPapers)
JEL-codes: E31 E37 E52 (search for similar items in EconPapers)
Date: 2025-05
New Economics Papers: this item is included in nep-cba, nep-ets, nep-for, nep-mon and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:cnb:wpaper:2025/8

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