A1213
Title: Monitoring joint tail risks: An application to growth and inflation
Authors: Jordi Llorens-Terrazas - Universidad Carlos III de Madrid (Spain) [presenting]
Abstract: The aim is to develop the concept of growth and inflation at risk frontier (GIaR). This is a bivariate generalization of the concepts of growth-at-risk (GaR) and inflation-at-risk (IaR). A novel approach is proposed to identify and estimate GIaR and provide uniformly valid upper and lower confidence bands. The procedure is first applied to predict the conditional probability of stagflation. Second, we compute worst-case scenarios for a policy maker who is concerned about the joint tail risk of low growth and high inflation. The effect that a tightening of financial conditions has on the joint tail risks is studied.
