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Inflation Target at Risk: A Time-varying Parameter Distributional Regression

Yunyun Wang, Tatsushi Oka, Dan Zhu

arXiv 19 Mar 2024 · Econometrics · 2 citations (OpenAlex)

arXiv:2403.12456 · PDF · DOI · OpenAlex · Extracted main text

Abstract

Macro variables frequently display time-varying distributions, driven by the dynamic and evolving characteristics of economic, social, and environmental factors that consistently reshape the fundamental patterns and relationships governing these variables. To better understand the distributional dynamics beyond the central tendency, this paper introduces a novel semi-parametric approach for constructing time-varying conditional distributions, relying on the recent advances in distributional regression. We present an efficient precision-based Markov Chain Monte Carlo algorithm that simultaneously estimates all model parameters while explicitly enforcing the monotonicity condition on the conditional distribution function. Our model is applied to construct the forecasting distribution of inflation for the U.S., conditional on a set of macroeconomic and financial indicators. The risks of future inflation deviating excessively high or low from the desired range are carefully evaluated. Moreover, we provide a thorough discussion about the interplay between inflation and unemployment rates during the Global Financial Crisis, COVID, and the third quarter of 2023.

Citation extraction

54
references
93
in-text mentions
54
distinct cited
3
self-citations
12,038
main-text words

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Most heavily cited references

The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.

ReferenceIntensityMentionsSectionsMain text
1Kilian, Lutz and Manganelli, Simone (2007) Quantifying the risk of deflation0.92844100%
2Korobilis, Dimitris and Landau, Bettina and Musso, Alberto and Phell… (2021) The time-varying evolution of inflation risks0.92844100%
3Lopez-Salido, David and Loria, Francesca (2024) Inflation at risk0.92843100%
4Primiceri, Giorgio E (2005) Time varying structural vector autoregressions and monetary policy0.84333100%
5Barnichon, Regis and Mesters, Geert (2020) Identifying modern macro equations with old shocks0.73732100%
6Blanchard, Olivier (2016) The Phillips curve: Back to the '60s?0.73732100%
7Del Negro, Marco and Lenza, Michele and Primiceri, Giorgio E and Tam… (2020) What's up with the Phillips Curve?0.73732100%
8Inoue, Atsushi and Rossi, Barbara and Wang, Yiru (2025) Has the Phillips curve flattened? self0.73732100%
9Forbes, Kristin and Gagnon, Joseph and Collins, Christopher G (2021) Low Inflation Bends the Phillips Curve around the World0.64422100%
10Harding, Martín and Lindé, Jesper and Trabandt, Mathias (2023) Understanding post‐COVID inflation dynamics0.64422100%

Showing the top 10 of 54 scored citations.

Cited by, within the corpus

arXiv econ.EM papers that cite this one, ranked by how heavily they lean on it.

Citing paperIntensityMentionsSections
1International vulnerability of inflation0.40511