Dominant Drivers of National Inflation

Jan Ditzen and Francesco Ravazzolo ()

No No 08/2022, Working Papers from Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School

Abstract: For western economies a long-forgotten phenomenon is on the horizon: rising inflation rates. We propose a novel approach christened D2ML to identify drivers of national inflation. D2ML combines machine learning for model selection with time dependent data and graphical models to estimate the inverse of the covariance matrix, which is then used to identify dominant drivers. Using a dataset of 33 countries, we find that the US inflation rate and oil prices are dominant drivers of national inflation rates. For a more general framework, we carry out Monte Carlo simulations to show that our estimator correctly identifies dominant drivers.

Pages: 36 pages
Date: 2022-12
New Economics Papers: this item is included in nep-ene, nep-env, nep-pbe, nep-pub and nep-res
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://hdl.handle.net/11250/3041831

Related works:
Working Paper: Dominant Drivers of National Inflation (2022)
Working Paper: Dominant Drivers of National Inflation (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:bny:wpaper:0112

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