 The role of global relative price changes in international comovement of inflationAleksei Kiselev and Aleksandra Zhivaykina The Journal of Economic Asymmetries, 2020, vol. 22, issue C Abstract: In this paper we investigate the impact of global relative price changes on domestic inflation. We use a dynamic hierarchical factor model (DHFM) to decompose consumer basket products’ inflation in a panel of countries into (i) a global factor, common to all price series and all countries, (ii) a price change shock at product group level, (iii) a price change shock at product subgroup level, and (iv) an idiosyncratic component. Using monthly data for 29 economies from 2003 to 2018 we find that product inflation rates demonstrate different sensitivity to common price shocks. For energy, some food and manufactured goods, global relative price changes may account for up to 49% of inflation variation which is quite high for this frequency and level of disaggregation. Moreover, common factors from the DHFM have significant explanatory power for overall CPI and its aggregate components across different countries. Keywords: Dynamic hierarchical factor model; Global inflation; Relative prices; Russia (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:joecas:v:22:y:2020:i:c:s1703494920300220 DOI: 10.1016/j.jeca.2020.e00175 Access Statistics for this article The Journal of Economic Asymmetries is currently edited by A.G. Malliaris More articles in The Journal of Economic Asymmetries from Elsevier |
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