Inflation dynamics: Expectations, structural breaks and global factors

Pierre Siklos

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: There is no consensus over the importance of “global forces†on inflation. This study explores the role of structural breaks in the inflation process, and their timing, whether it is common across countries, and the extent to which ‘global forces’ are relevant. Three conclusions stand out. Global inflation impacts inflation in both AE and EME, but the impact is more heterogeneous than existing narratives have argued. One’s interpretation of global influences on domestic inflation differs, according to whether poorly performing economies in inflation terms are considered as opposed to the standard practice of examining mean inflation performance. A focus on observed inflation alone ignores that inflation expectations, including a global version of this variable, also plays a critical in inflation dynamics. Finally, there are significant spillovers in inflation between AE and EME, but these too are sensitive according to relative inflation performance. Some policy implications are also drawn.

Keywords: Inflation; Globalization; monetary policy; Vector autoregressions; local projections; quantile regressions (search for similar items in EconPapers)
JEL-codes: C31 C32 E31 E52 E58 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2020-05
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Related works:
Journal Article: Inflation Dynamics: Expectations, Structural Breaks and Global Factors (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2020-53

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