2020
DOI: 10.1016/j.jinteco.2019.103265
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Global factors and trend inflation

Abstract: We develop an empirical model to study the influence of global factors in driving trend inflation and the inflation gap. We apply our model to 7 developed economies and 21 emerging market 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. Finally, we find that the effect of global factors to be… Show more

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Cited by 65 publications
(31 citation statements)
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References 50 publications
(64 reference statements)
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“…This means that these countries had stable currencies, which also contributed to their inflation stability. Therefore, a more probable explanation is that some other (external) factors have some influence on the inflation in these two Baltic states, whereas a sizable portion of this influence most likely goes to commodity price shocks, such as energy and food (see Kamber and Wong, 2020). According to these authors, susceptibility to global inflationary shocks is greater in emerging market economies relative to the developed economies.…”
Section: Discussion Of the Resultsmentioning
confidence: 99%
“…This means that these countries had stable currencies, which also contributed to their inflation stability. Therefore, a more probable explanation is that some other (external) factors have some influence on the inflation in these two Baltic states, whereas a sizable portion of this influence most likely goes to commodity price shocks, such as energy and food (see Kamber and Wong, 2020). According to these authors, susceptibility to global inflationary shocks is greater in emerging market economies relative to the developed economies.…”
Section: Discussion Of the Resultsmentioning
confidence: 99%
“…This is a limitation, given China's growing role in the global economy and increasing importance to Australia in particular. However, to the extent that commodity prices are driven by global economic conditions, the role of China is implicitly accounted for via the commodity price series, as argued in Kamber and Wong (2020). Our consideration of real TWI also serves to implicitly account for more than just a USbased foreign sector, which Dungey and Fry (2003) find is important in the context of Australian structural vector autoregressive models (SVARs).…”
Section: Further Implications Of the Factormentioning
confidence: 99%
“…19 More sophisticated approaches rely on economic models which aim to study medium and long-term dynamics of inflation. According to Kamber and Wong (2018), inflation is determined domestically in the long run, even though foreign shocks matter for short-term movements. However, these short-term fluctuations are very dependent on oil and food prices and on the business cycle, respectively.…”
Section: Inflationmentioning
confidence: 99%