Inflation Dynamics: Dead, Dormant, or Determined Abroad?

Kristin Forbes

Brookings Papers on Economic Activity, 2019, vol. 50, issue 2 (Fall), 257-338

Abstract: Inflation dynamics have been difficult to explain over the last decade. This paper explores whether a more comprehensive treatment of globalization can help. CPI inflation has become more synchronized around the world since the 2008 crisis, but core and wage inflation have become less synchronized. Global factors (including commodity prices, world slack, exchange rates, and global value chains) are significant drivers of CPI inflation in a cross-section of countries, and their role has increased over the last decade, particularly the role of nonfuel commodity prices. These global factors, however, do less to improve our understanding of core and wage inflation. Key results are robust to using a less-structured trend-cycle decomposition instead of a Phillips curve framework, with the set of global variables more important for understanding the cyclical component of inflation over the last decade but not the underlying slow-moving inflation trend. Domestic slack still plays a role for all the inflation measures, although globalization has caused some "flattening" of this relationship, especially for CPI inflation. Although CPI inflation is increasingly determined abroad, core and wage inflation are still largely domestic processes.

Keywords: inflation; Phillips Curve; CPI; global economy; domestic slack (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.brookings.edu/articles/inflation-dynam ... r-determined-abroad/ (text/html)

Related works:
Working Paper: Inflation Dynamics: Dead, Dormant, or Determined Abroad? (2019)
Working Paper: Inflation Dynamics: Dead, Dormant, or Determined Abroad? (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bin:bpeajo:v:50:y:2019:i:2019-02:p:257-338

Access Statistics for this article

More articles in Brookings Papers on Economic Activity from Economic Studies Program, The Brookings Institution Contact information at EDIRC.
Bibliographic data for series maintained by Haowen Chen ().