Locally Stationary Quantile Regression for Inflation and Interest Rates. Issue 2 (3rd April 2022)

• Record Type: Journal Article
• Authors: Xu, Zhuying; Kim, Seonjin; Zhao, Zhibiao
• Is Part Of: Journal of business & economic statistics. Volume 40:Issue 2(2022)
• Page Start: 838
• Page End: 851
• Publication Date: 2022-04-03
• Subjects: Inflation -- Interest rates -- Locally stationary model -- Nonparametric estimation -- Quantile regression -- Time-varying model; Economics -- Statistical methods -- Periodicals; Commercial statistics -- Periodicals; Économie politique -- Méthodes statistiques -- Périodiques; Statistique commerciale -- Périodiques; 330.015195
• DOI: 10.1080/07350015.2021.1874389
• Languages: English
• ISSNs: 0735-0015

Abstract

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.