Is Digitalization Driving Domestic Inflation?

Balázs Csontó, Yuxuan Huang and Camilo Tovar ()

No 2019/271, IMF Working Papers from International Monetary Fund

Abstract: This paper examines the extent to which digitalization—measured by a new proxy based on IP addresses allocations per country—has influenced inflation dynamics in a sample of 36 advanced and emerging economies over 2000-2017. Phillips curve estimates show that digitalization has a statistically significant negative effect on inflation in the short run. Its economic impact is not large but has increased since 2012 and mainly operates through a cost/competition channel. Principal components and cointegration analysis further suggest digitalization is a key driver of lower trend inflation.

Keywords: WP; Phillips curve; Inflation; Digitalization; IP Address; Internet; inflation expectation; inflation dynamics; food inflation; inflation trend; inflation variation; trend inflation; inflation gap; Global value chains; Digital economy; Output gap; Global (search for similar items in EconPapers)
Pages: 45
Date: 2019-12-06
New Economics Papers: this item is included in nep-knm and nep-mac
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Citations: View citations in EconPapers (5)

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