Underlying inflation and asymmetric risks

Arbeitspapier

We propose a new measure of underlying inflation that informs, in real time, about asymmetric risks on the outlook of inflationary pressures. The asymmetries are generated through nonlinearities induced by economic activity. The new indicator is based on a multivariate regime-switching framework jointly estimated on disaggregated sub-components of the euro area HICP and has several additional advantages. First, it is able to swiftly infer abrupt changes in underlying inflation. Second, it helps to timely track turning points in underlying inflation. Third, the proposed indicator also has a satisfactory performance with respect to various criteria relevant for inflation monitoring.

Object Details

• ISBN: 978-92-899-6213-1
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 2848

Classification and Topics

• Classification: Wirtschaft ; General Aggregative Models: Forecasting and Simulation: Models and Applications ; Price Level; Inflation; Deflation ; Bayesian Analysis: General ; Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes ; Single Equation Models; Single Variables: Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
• Subject: underlying inflation ; asymmetric risks ; regime-switching ; Bayesian methods

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Le Bihan, Hervé ; Leiva-Leon, Danilo ; Pacce, Matías
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2023

Further information

• DOI: doi:10.2866/196990
• Handle: http://hdl.handle.net/10419/283406
• Last update: 10.03.2025, 11:44 AM CET