Inflation comovements in advanced economies: Facts and drivers

Luis Alvarez, Maria Dolores Gadea and Ana Gómez‐Loscos
Authors registered in the RePEc Author Service: Ana Gómez-Loscos

The World Economy, 2021, vol. 44, issue 2, 485-509

Abstract: In this paper, we analyse inflation comovements and their macroeconomic drivers across a wide set of advanced economies. We find a high degree of inflation interdependence, which is highest for euro area countries, which show strong trade links and share a common monetary policy. In contrast, core inflation interdependence is very limited. We also find that inflation interconnectedness is a medium‐ to long‐run phenomenon. Inflation comovements across countries are well explained by an open economy new Keynesian Phillips curve.

Date: 2021
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