On the Conditional Distribution of Euro Area Inflation Forecast

Busetti, Fabio; Caivano, Michele; Rodano, Maria Lisa

doi:10.2139/ssrn.2722440

Cited by 28 publications

(13 citation statements)

References 120 publications

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“…Manzan and Zerom (2013) argue that macroeconomic indicators are useful for predicting the distribution of US in ‡ation, while Wolters and Tillman (2015) …nd a decrease in persistence at all quantiles since the early Eighties. The distribution of euro area in ‡ation is analyzed in Busetti, Caivano, Rodano (2015), Busetti (2017), Bereau, Faubert, Schmidt (2018) and Tagliabracci (2019) with …ndings that are broadly comparable to what presented here for the case of …xed coe¢ cients.…”

Section: Introduction *supporting

confidence: 56%

“…The right panel considers instead model (f) of Table 1, where the import de ‡ator is replaced by the nominal e¤ective exchange rate. It is interesting to note that: (i) the coe¢ cients are strikingly similar for all 9 The variance matrix of the time-varying expectile regression coe¢ cient, b V t b t (!) ; is computed following Giraitis et al (2014).…”

Section: Time-varying E¤ects For Conditional Expectiles and The Globamentioning

confidence: 93%

“…The con…dence bands, displayed for the case of more smoothing; represent 2 times the time-varying standard deviation of the coe¢ cient. 9 Looking at the coe¢ cients of domestic output gap the …gure provides evidence of some increase in the slope of the Phillips curve in the latest decade but only for the lower quantiles; the response of foreign gap appears on the other hand more stable throughout time, with only some tendency to increase (from zero or slightly negative values) for ! = 0:90:…”

Section: Time-varying E¤ects For Conditional Expectiles and The Globamentioning

confidence: 99%

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Domestic and Global Determinants of Inflation: Evidence from Expectile Regression

2019

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The paper investigates the role of domestic and global determinants of euro area core inflation. We analyse the entire conditional distribution of inflation by estimating a Phillips curve type relationship using an expectile regression approach, extended to capture time-varying effects. The main findings are as follows. First, both the domestic and foreign output gap are significant drivers of euro area core inflation, once external demand pressures are properly orthogonalized in a modified measure of domestic gap. However, the inflationary impact of the domestic component is relatively stronger. Second, the domestic output gap has a bigger influence in the right tail of the conditional distribution of inflation. Third, adding international price pressures in the regression weakens the link between inflation and the foreign output gap. Fourth, in a time-varying perspective, there is an increase in the response of inflation to the domestic gap in the last decade but only at the lower quantiles. Overall, the evidence on the so-called "globalization hypothesis" is mixed: while the pass-through to inflation of foreign prices and the exchange rate increased over time at all quantiles, the impact of global slack remained broadly stable, particularly in the central part of the distribution.

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Section: Introduction *supporting

confidence: 56%

Section: Time-varying E¤ects For Conditional Expectiles and The Globamentioning

confidence: 93%

Section: Time-varying E¤ects For Conditional Expectiles and The Globamentioning

confidence: 99%

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Domestic and Global Determinants of Inflation: Evidence from Expectile Regression

2019

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“…Quantile regression models show that inflation is more persistent in the lowest quantiles of the distribution of inflation (Busetti, Caivano and Rodano, 2015). Moreover, inflation is less sensitive to cyclical conditions in the left tail of the distribution, where inflation is low and the output gap is typically large and negative.…”

Section: The Disinflation and The Risk Of Deflationmentioning

confidence: 98%

The Non-Standard Monetary Policy Measures of the ECB: Motivations, Effectiveness and Risks

Neri¹,

Siviero²

2018

Credit and Capital Markets – Kredit und Kapital

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This paper examines the challenges faced by the European Central Bank since the outbreak of the global financial crisis. From 2008 to 2014, the need to preserve the correct functioning of the monetary policy transmission mechanism and ensure the supply of credit to the private sector stretched the limits of conventional monetary policy. In 2015, the risk of deflation led the ECB to start a large scale asset purchase programme. The analysis is largely based on a review of the many studies that Banca d’Italia staff has produced on the factors that have brought inflation to unprecedented low levels in 2014 and on the effects of the asset purchase programme. Zusammenfassung Dieser Beitrag untersucht die Herausforderungen, vor denen die Europäische Zentralbank seit dem Ausbruch der globalen Finanzkrise steht. Von 2008 bis 2014 hat die Notwendigkeit, das ordnungsgemäße Funktionieren des geldpolitischen Transmissionsmechanismus zu wahren und die Kreditversorgung des privaten Sektors sicherzustellen, die Grenzen der konventionellen Geldpolitik überschritten. Im Jahr 2015 führte das Deflationsrisiko dazu, dass die EZB ein groß angelegtes Anleihenkaufprogramm aufnahm. Die vorliegende Analyse basiert im Wesentlichen auf einer Überprüfung der zahlreichen Studien, welche die Mitarbeiter der Banca d‘Italia zu den Faktoren erstellt haben. Diese Faktoren haben einerseits die Inflation 2014 auf ein beispiellos niedriges Niveau gebracht und andererseits Auswirkungen auf das Programm zum Ankauf von Vermögenswerten zur Folge gehabt. JEL Classification: E31, E43, E52

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“…The IMF (2016) emphasizes the role that the lower bound on policy rates may have played in recent years in increasing the sensitivity of expectations to inflation surprises, an indicator of the degree of anchoring of inflation expectations (Figure 10). Busetti et al (2015) show that if agents have incomplete information about the working of the economy and form expectations through an adaptive learning process, the effects of negative surprises on inflation may become extremely persistent, compared with the case in which agents are 'perfectly rational' and know the correct parameters of the economy, including the inflation rate. A similar conclusion was reached by economists at the Bank of Japan, and used to motivate the 'Quantitative and Qualitative Monetary Easing with Yield Curve Control' and the 'inflation-overshooting commitment' in September 2016.…”

Section: Inflation Developments: Facts and Explanationsmentioning

confidence: 99%

Monetary Policy in a Low Interest Rate Environment

Ferrero

Neri

2017

SSRN Journal

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The debate on the underlying causes of the decline of interest rates to historically low levels is ongoing both in academia and among policy makers. Several explanations have been put forward, ranging from those citing real and structural factors to those underscoring the importance of cyclical and financial phenomena. However, the empirical evidence regarding their relative importance is still limited. These different but complementary views can be framed around the concept of the natural rate of interest and the monetary transmission mechanism. The low interest rate environment that still characterizes advanced economies raises important questions regarding the implications for monetary policy in the medium-and long-run. Our work provides a systematic outline of the potential changes to monetary policy strategies that could ensue.

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On the Conditional Distribution of Euro Area Inflation Forecast

Cited by 28 publications

References 120 publications

Domestic and Global Determinants of Inflation: Evidence from Expectile Regression

Domestic and Global Determinants of Inflation: Evidence from Expectile Regression

The Non-Standard Monetary Policy Measures of the ECB: Motivations, Effectiveness and Risks

Monetary Policy in a Low Interest Rate Environment

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