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Global factors and trend inflation

Gunes Kamber and Benjamin Wong

Journal of International Economics, 2020, vol. 122, issue C

Abstract: We develop an empirical model to study the influence of global factors in driving trend inflation and the inflation gap. We apply our model to 7 developed economies and 21 emerging market economies. Our results suggest that while global factors can have a sizeable influence on the inflation gap, they play only a marginal role in driving trend inflation. Much of the influence of global factors in the inflation gap may be reflecting commodity price shocks. Finally, we find the effect of global factors to be greater in our sample of emerging market economies relative to the developed economies. There is some evidence which suggest propagation mechanisms, which may reflect institutional structures or policy choices, can explain the greater role for global factors in driving trend inflation in emerging market economies.

Keywords: Trend inflation; Foreign shocks; Beveridge-Nelson decomposition (search for similar items in EconPapers)
JEL-codes: C32 E31 F41 (search for similar items in EconPapers)
Date: 2020
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Working Paper: Global factors and trend inflation (2019) Downloads
Working Paper: Global factors and trend inflation (2018) Downloads
Working Paper: Global Factors and Trend Inflation (2018) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:122:y:2020:i:c:s002219961930087x

DOI: 10.1016/j.jinteco.2019.103265

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