51 Pages Posted: 3 Nov 2012
Date Written: November 1, 2012
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: 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