Three facts about global inflation

Kenneth Clements and Yihui Lan
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Kenneth Clements: Department of Economics, University of Western Australia, http://www.web.uwa.edu.au/person/kenneth.clements
Yihui Lan: Department of Accounting and Finance, University of Western Australia, http://www.web.uwa.edu.au/person/yihui.lan

No 26-04, Economics Discussion / Working Papers from The University of Western Australia, Department of Economics

Abstract: This paper introduces an internally consistent approach to measure the global economy with indexes of inflation, growth and currency movements, which together account for the changing rankings of countries. This leads to three key patterns. First, global inflation above a modest threshold comes with more cross-country raggedness or dispersion, meaning more uncertainty in the world. The minimum-variance rate of global inflation follows from this, together with the “natural rate” of cross-country dispersion. Second, countries’ propensity to import inflation differs substantially. High-inflation countries tend to be more susceptible to global inflation, while more affluent ones are more insulated. Surprisingly, the economic size of a country seems to have no impact on the transmission of inflation. Finally, using a Markov-chain approach and more traditional measures, inflation is found to be surprisingly fluid, not sticky.

Keywords: global inflation; inflation transmission; inflation persistence (search for similar items in EconPapers)
JEL-codes: C32 E31 F41 (search for similar items in EconPapers)
Pages: 95
Date: 2026
Note: MD5 = 8f28ccb4e7dff404d3e16ec311cca12d
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