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The Term Structure of Inflation at Risk: A Panel Quantile Regression Approach

May 20, 2022
MAKABE Yoshibumi*1
NORIMASA Yoshihiko*2


This paper uses panel quantile regression to analyze the factors affecting inflation risks defined as the tail of the predictive inflation distribution. We construct a panel going back to the "Great Inflation" period (from the late 1960s) and include variables that capture not only downside risks, which many recent studies have focused on, but also upside risks to examine the developments in both upside and downside risks to inflation in the United States, Germany, and the United Kingdom. Our analysis shows that unit labor costs and real government spending have a significant effect on the upward risks to inflation. We also find that the effect of import prices on inflation risks is short-lived, while the effect of real government spending and unit labor costs persists over the medium term. These results also show that the term structure of the effect on inflation risks differs depending on the factor involved.

JEL classification
C21, E27, E31

Inflation risk, panel quantile regression, term structure

We would like to thank Kosuke Aoki, Sohei Kaihatsu, Yoshitaka Ichise, and members of the staff of the Bank of Japan for their helpful comments. The views expressed in this paper are those of the authors and do not represent the official views of the Bank of Japan. Any possible errors are the authors' responsibility.

  1. *1International Department, Bank of Japan
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  2. *2International Department, Bank of Japan
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