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Global factors and trend inflation

Gunes Kamber and Benjamin Wong

No 688, BIS Working Papers from Bank for International Settlements

Abstract: We develop a model to empirically study the influence of global factors in driving trend inflation and the inflation gap.We apply our model to five established inflation targeters and a group of heterogeneous Asian 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. We also find global factors have a greater influence on inflation, and especially trend inflation, for the group of Asian economies relative to the established inflation targeters. A possible interpretation is that inflation targeting may have reduced the influence of global factors on inflation, and especially so on trend inflation.

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)
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-sea
Date: 2018-01
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Related works:
Working Paper: Global factors and trend inflation (2019) Downloads
Working Paper: Global Factors and Trend Inflation (2018) Downloads
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