Structural Breaks in the International Dynamics of Inflation

Erdenebat Bataa, Denise Osborn, Marianne Sensier () and Dick van Dijk

The Review of Economics and Statistics, 2013, vol. 95, issue 2, 646-659

Abstract: This paper proposes an iterative procedure to discriminate between structural breaks in the coefficients and the disturbance covariance matrix of a system of equations, with recursive procedures then identifying individual coefficient shifts and separating volatility from correlation breaks. Structural breaks in short-term cross-country inflation relations are then examined for major G-7 economies and within the euro area. There is evidence that the euro area leads inflation in North America, while changing short-term interactions apply within the euro area. Covariability generally increases from the late 1990s, while euro-area countries move from essentially idiosyncratic contemporaneous variation to comovement in the 1980s. © 2013 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Keywords: inflation; international dynamics; structural breaks (search for similar items in EconPapers)
JEL-codes: C32 E31 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (38)

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