Global Inflation

Matteo Ciccarelli and Benoit Mojon ()

Kiel Working Papers from Kiel Institute for the World Economy

Abstract: This paper shows that ination in industrialized countries is largely a global phenom- enon. First, inations of (22) OECD countries have a common factor that alone accounts for nearly 70% of their variance. This large variance share that is associated to Global Ination is not only due to the trend components of ination (up from 1960 to 1980 and down thereafter) but also to uctuations at business cycle frequencies. Second, Global In- ation is, consistently with standard models of ination, a function of real developments at short horizons and monetary developments at longer horizons. Third, there is a very robust "error correction mechanism" that brings national ination rates back to Global Ination. This model consistently beats the previous benchmarks used to forecast ination 1 to 8 quarters ahead across samples and countries.

Keywords: Inflation; common factor; international business cycle; OECD countries (search for similar items in EconPapers)
JEL-codes: E31 E37 F42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-for, nep-mac and nep-mon
Date: 2007-06
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http://www.ifw-members.ifw-kiel.de/publications/global-inflation/kap1337.pdf (application/pdf)

Related works:
Working Paper: Global inflation (2005)
Working Paper: Global Inflation (2005)
Working Paper: Global inflation (2008)
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Persistent link: http://EconPapers.repec.org/RePEc:kie:kieliw:1337

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