Global Inflation

Matteo Ciccarelli and Benoit Mojon

No 1337, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: This paper shows that in inflation in industrialized countries is largely a global phenomenon. First, inflations of (22) OECD countries have a common factor that alone accounts for nearly 70% of their variance. This large variance share that is associated to Global Inflation is not only due to the trend components of inflation (up from 1960 to 1980 and down thereafter) but also to fluctuations at business cycle frequencies. Second, Global Inflation is, consistently with standard models of inflation, a function of real developments at short horizons and monetary developments at longer horizons. Third, there is a very robust "error correction mechanism" that brings national inflation rates back to Global Inflation. This model consistently beats the previous benchmarks used to forecast inflation 1 to 8 quarters ahead across samples and countries.

Keywords: Inflation; common factor; international business cycle; OECD countries (search for similar items in EconPapers)
JEL-codes: E31 E37 F42 (search for similar items in EconPapers)
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://www.econstor.eu/bitstream/10419/17853/1/kap1337.pdf (application/pdf)

Related works:
Working Paper: Global reflation ? (2021)
Journal Article: Global Inflation (2010)
Working Paper: Global inflation (2008)
Working Paper: Global Inflation (2005)
Working Paper: Global inflation (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1337

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