Is inflation a global phenomenon?

Matteo Ciccarelli and Benoit Mojon

Research Bulletin, 2005, vol. 3, 6-7

Abstract: We show that inflation is largely a global phenomenon. First, inflation rates of 22 OECD countries have a common factor that alone accounts for nearly 70% of their variance. Second, Global Inflation is a function of real developments at short horizons and monetary developments at longer horizons. Third, there is a robust "Error Correction Mechanism" that brings national inflation rates back to Global Inflation. Preliminary results show that, by exploiting this mechanism, we can beat standard benchmarks used to forecast national inflation from 1 to 8 quarters ahead, across samples and countries. JEL Classification: E31, E37, F42

Keywords: global; inflation (search for similar items in EconPapers)
Date: 2005-11
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Citations: View citations in EconPapers (3)

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