Asymmetry in the Conditional Distribution of Euro-area Inflation

Macroeconomic conditions are among the key determinants of the inflation outlook. This paper studies how business cycles affect the conditional distribution of euro-area inflation forecasts. Using a quantile regression approach, I estimate the conditional distribution of inflation to assess the impact of business cycle conditions over time and the possible asymmetries across quantiles of inflation. Interestingly, downside risks to inflation forecasts are related to the business cycle while upside risks are instead relatively stable over time and are not affected by the state of the economy.