 A time-varying Phillips curve with global factors: Are global factors important?Alain Kabundi (), Aubrey Poon and Ping Wu Economic Modelling, 2023, vol. 126, issue C Abstract: Increased globalization and trade have integrated the world, but whether they are the underlying drivers of the flattening of the Phillips curve slope is not clear. This problem is further complicated since time-varying parameters are empirically important in most applications as the role of global factors may change over time. This paper investigates empirically the role played by global and domestic factors in driving dynamics in inflation using a panel data comprising of 23 advanced (AEs) and 11 emerging market economies (EMEs), from 1995Q1 to 2018Q1. The results indicate the predominance and increasing importance of global factors in explaining inflation dynamics, especially for EMEs. The Phillips curve is flat for both groups, but it is flatter in AEs. The results are consistent with the theoretical view that increased globalization and trade are underlying factors behind the flattening of the Phillips curve. Keywords: Trend inflation; Global factors; Non-linear state space model; Multi-country (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:ecmode:v:126:y:2023:i:c:s0264999323002353 DOI: 10.1016/j.econmod.2023.106423 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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