All together now: do international factors explain relative price comovements?

Ozer Karagedikli, Haroon Mumtaz and Misa Tanaka

No 381, Bank of England working papers from Bank of England

Abstract: Recent research has found evidence of increasing comovement in CPI inflation rates across industrialised countries. This paper considers whether this can be attributed to greater global integration of product markets. To examine this question, we build a data set of 28 matched product category price indices for fourteen advanced economies for 1998 Q1 to 2008 Q2, and decompose the inflation rates into a world factor, country-specific factors, and category-specific factors using a Bayesian dynamic factor model with Gibbs sampling. We find that the category-specific factors account for a large part of the comovement in the prices of goods which are intensive in internationally traded primary commodities; but this is less evident for other traded goods. We also find that both the world factor and the category-specific factors become more significant in explaining the movement in the relative prices in the second half of our sample.

Keywords: Disaggregated international price; dynamic factor model; Gibbs sampling (search for similar items in EconPapers)
JEL-codes: E30 E52 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2010-03-10
New Economics Papers: this item is included in nep-cba, nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Working Paper: All together now: Do international factors explain relative price co-movements? (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0381

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