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The financial content of inflation risks in the euro area

Philippe Andrade, V. Fourel, E. Ghysels and Julien Idier

Working papers from Banque de France

Abstract: Recent studies emphasize that survey-based inflation risk measures are informative about future inflation and thus useful for monetary authorities. However, these data are typically available at a quarterly frequency whereas monetary policy decisions require a more frequent monitoring of such risks. Using the ECB survey of professional forecasters, we show that high-frequency financial market data have predictive power for the low-frequency survey-based inflation risk indicators observed at the end of a quarter. We rely on MIDAS regressions to handle the problem of mixing data with different frequencies that such an analysis implies. We also illustrate that upside and downside risks react differently to financial indicators.

Keywords: inflation forecasts; inflation risk; survey data; financial data; MIDAS regression. (search for similar items in EconPapers)
JEL-codes: C53 C83 E31 E37 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2013
New Economics Papers: this item is included in nep-cba, nep-eec, nep-for, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:437

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