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.
Philippe Andrade, Eric Ghysels and Julien Idier
Classification JEL : E31, E37, E43, E52
Keywords : inflation expectations, risk, uncertainty, survey data, inflation dynamics, monetary policy
Updated on: 06/12/2018 11:09