Tails of Inflation Forecasts and Tales of Monetary Policy

Philippe Andrade, E. Ghysels and Julien Idier

Working papers from Banque de France

Abstract: 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.

Keywords: inflation expectations; risk; uncertainty; survey data; inflation dynamics; monetary policy. (search for similar items in EconPapers)
JEL-codes: E31 E37 E43 E52 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2012
New Economics Papers: this item is included in nep-cba, nep-ecm, nep-for, nep-mac, nep-mon and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30)

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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:407

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