Inflation at Risk

49 Pages Posted: 1 Mar 2022 Last revised: 20 Feb 2024

See all articles by David Lopez-Salido

David Lopez-Salido

Board of Governors of the Federal Reserve System

Francesca Loria

Board of Governors of the Federal Reserve System

Multiple version iconThere are 2 versions of this paper

Date Written: February 20, 2023

Abstract

Inflation at risk (IaR) refers to the tails of the distribution of inflation over a forecast horizon. We study IaR using quantile regressions in a panel of OECD countries for a sample that includes the Global Financial Crisis and the rise in inflation during the Covid-19 pandemic. First, we find that even though recently the conditional mean of inflation has been low and stable, there was ample variability in the tails. Second, financial conditions have a nonlinear effect on the predictive inflation distribution. Third, the role of economic drivers of IaR has changed over time. Our approach to measure tails complements others using financial market quotes and survey data.

Keywords: Inflation Risks, Quantile Regression

JEL Classification: C21, C53, E31, E44

Suggested Citation

Lopez-Salido, David and Loria, Francesca, Inflation at Risk (February 20, 2023). Available at SSRN: https://ssrn.com/abstract=4002673 or http://dx.doi.org/10.2139/ssrn.4002673

David Lopez-Salido

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Francesca Loria (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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