Locally Stationary Quantile Regression for Inflation and Interest Rates

Zhuying Xu, Seonjin Kim, Zhibiao Zhao

Research output: Contribution to journalArticlepeer-review

Abstract

Motivated by the potential time-varying and quantile-specific relation between inflation and interest rates, we propose a locally stationary quantile regression approach to model the inflation and interest rates relation. Large sample theory for estimation and inference of quantile-varying and time-varying coefficients are established. In empirical analysis of inflation and interest rates relation, it is found that the estimated functional coefficients vary with time in a complicated manner. Furthermore, the relation is quantile-specific: not only do the selected orders differ for different quantiles, but also the coefficients corresponding to different quantiles can display completely different patterns.

Original languageEnglish (US)
Pages (from-to)838-851
Number of pages14
JournalJournal of Business and Economic Statistics
Volume40
Issue number2
DOIs
StatePublished - 2022

All Science Journal Classification (ASJC) codes

  • Statistics and Probability
  • Social Sciences (miscellaneous)
  • Economics and Econometrics
  • Statistics, Probability and Uncertainty

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