Download this Paper Open PDF in Browser

Tails of Inflation Forecasts and Tales of Monetary Policy

51 Pages Posted: 3 Nov 2012  

Philippe Andrade

Banque de France

Eric Ghysels

University of North Carolina Kenan-Flagler Business School; University of North Carolina (UNC) at Chapel Hill - Department of Economics

Julien Idier

European Central Bank (ECB)

Date Written: November 1, 2012

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: Tail risk, Survey of Professional Forecasters

JEL Classification: E40, E47

Suggested Citation

Andrade, Philippe and Ghysels, Eric and Idier, Julien, Tails of Inflation Forecasts and Tales of Monetary Policy (November 1, 2012). UNC Kenan-Flagler Research Paper No. 2013-17. Available at SSRN: https://ssrn.com/abstract=2169976 or http://dx.doi.org/10.2139/ssrn.2169976

Philippe Andrade

Banque de France ( email )

Paris
France

Eric Ghysels (Contact Author)

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )

Gardner Hall, CB 3305
Chapel Hill, NC 27599
United States
919-966-5325 (Phone)
919-966-4986 (Fax)

HOME PAGE: http://www.unc.edu/~eghysels/

Julien Idier

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Paper statistics

Downloads
141
Rank
174,638
Abstract Views
765