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Inflation at risk in advanced and emerging economies

Ryan Banerjee, Juan Contreras (), Aaron Mehrotra and Fabrizio Zampolli ()

No 883, BIS Working Papers from Bank for International Settlements

Abstract: We examine how inflation risks have changed over time in a large panel of advanced and emerging market economies (EMEs). Quantile regressions show a general decline in upside inflation risks over time, reflecting successful disinflationary processes and the adoption of inflation targeting regimes. But important non-linearities remain. In advanced economies, the zero lower bound represents a prominent source of downside inflation risk. In EMEs, the exchange rate remains a powerful source of nonlinearity, with large exchange rate depreciations associated with upside inflation risks. Tightening financial conditions increase both up- and downside inflation risks.

Keywords: inflation risk; monetary policy framework; zero lower bound; inflation targeting (search for similar items in EconPapers)
JEL-codes: E31 E37 E52 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2020-09
New Economics Papers: this item is included in nep-mac and nep-mon
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