Has greater globalization made forecasting inflation more difficult?

Patrick Roy and Mark Wynne

Economic Letter, 2009, vol. 4, issue jul, No 5

Abstract: U.S. inflation and real economic activity became more difficult to forecast during the Great Moderation. We investigate the possibility that the decline in the ability to forecast inflation may be due to greater globalization. As countries become more integrated through trade and financial flows, domestic inflation has a larger foreign component that is determined by variables typically excluded from forecasts.

Keywords: International trade; Inflation (Finance); Globalization; Forecasting (search for similar items in EconPapers)
Date: 2009
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