Locally Stationary Quantile Regression for Inflation and Interest Rates

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-...

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Bibliographic Details
Published inJournal of business & economic statistics Vol. 40; no. 2; pp. 838 - 851
Main Authors Xu, Zhuying, Kim, Seonjin, Zhao, Zhibiao
Format Journal Article
LanguageEnglish
Published Alexandria Taylor & Francis 03.04.2022
Taylor & Francis Ltd
Subjects
Inflation
Interest rates
Locally stationary model
Nonparametric estimation
Nonparametric statistics
Quantile regression
Time-varying model
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Summary: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.
ISSN:0735-0015
1537-2707
DOI:10.1080/07350015.2021.1874389