Are inflation movements global in nature?

Zo Andriantomanga

Macroeconomic Dynamics, 2025, vol. 29, -

Abstract: This paper adds to the literature on global inflation synchronization by distinguishing the traded and non-traded content of the consumption basket. Using a novel database of monthly CPI series of 40 countries from 2000, a dynamic factor model with stochastic volatility decomposes inflation into global, income-group, and idiosyncratic components. While synchronization has historically been prominent in tradable goods inflation, findings also reveal an increasing synchronization in non-tradable inflation. Second, I use a time-varying parameter vector autoregressive model to investigate the potential spillover effect. The results provide evidence of spillover from tradable to non-tradable inflation, while the reverse is mainly muted over the sample. Finally, results from local projections indicate that a tightening of US monetary policy causes a significant decline in global headline inflation, which is primarily driven by the heightened sensitivity of tradable goods.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:cup:macdyn:v:29:y:2025:i::p:-_97

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