Advanced Economy Inflation: The Role of Global Factors

Mikolajun, Irena; Lodge, David M.

doi:10.2139/ssrn.2831946

Cited by 19 publications

(12 citation statements)

References 26 publications

(32 reference statements)

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Ihrig et al (2010) interacts key terms with measures of openness to capture how globalization could change relationships between different variables. Mikolajun and Lodge (2016) studies the role of globalization in a Phillips curve framework and is similar to parts of Section IV below. 19 Rather than focusing on one channel by which globalization could affect inflation, or one framework, this paper takes a more comprehensive approach.…”

Section: Globalization and Inflation Dynamics: The Arguments And Prev...mentioning

confidence: 99%

“…The magnitudes of the coefficients on most of the global variables also increase (in absolute value) over the last decade. All the global coefficients are significant, except on commodity 40 For evidence, see Albuquerque and Baumann (2017), Blanchard et al (2015), IMF (2016), and Mikolajun and Lodge (2016). 41 The sensitivity analysis shows that excluding the period around the GFC has minimal impact on the key results.…”

Section: Cpi Inflation Domestic and Global Variables: Have The Relati...mentioning

confidence: 99%

“…For recent work, seeForbes (2019) andHa et al (2019).6 For excellent overviews that capture the key issues, seeStock and Watson (2010),Gordon (2013),Ball and Mazumder (2015),Berganza et al, (2016),Miles et al (2017),Blanchard (2018), andHa et al (2019).7 Papers studying the role of globalization in inflation include:Ball (2006),Borio and Filardo (2007),Ihrig et al (2010),Berganza et al (2016),Mikolajun and Lodge (2016),Auer et al (2016.8 One noteworthy exception isJordà and Nechio (2018), which uses the "trilemma" and how different types of countries were affected by the GFC as an instrument to estimate changes in the Phillips curve during this period.…”

mentioning

confidence: 99%

“…Ha et al (2019) provides an excellent overview of the evidence for and against a role for global slack in Annex 3.1.19 Mikolajun and Lodge (2016) does not use the other modelling approaches (such as trend-cycle decomposition) or control for GVCs, but adds a "global inflation" variable, which may capture other effects (such as from global pricing competition).…”

mentioning

confidence: 99%

See 3 more Smart Citations

Inflation Dynamics: Dead, Dormant, or Determined Abroad?

Forbes

2019

SSRN Journal

View full text Add to dashboard Cite

Inflation dynamics have been difficult to explain over the last decade. This paper explores if a more comprehensive treatment of globalization can help. CPI inflation has become more synchronized around the world since the 2008 crisis, but core and wage inflation have become less synchronized. Global factors (including commodity prices, world slack, exchange rates, and global value chains) are significant drivers of CPI inflation in a cross-section of countries, and their role has increased over the last decade, particularly the role of non-fuel commodity prices. These global factors, however, do less to improve our understanding of core and wage inflation. Key results are robust to using a less-structured trend-cycle decomposition instead of a Phillips curve framework, with the set of global variables more important for understanding the cyclical component of inflation over the last decade, but not the underlying slow-moving inflation trend. Domestic slack still plays a role for all the inflation measures, although globalization has caused some "flattening" of this relationship, especially for CPI inflation. Although CPI inflation is increasingly "determined abroad", core and wage inflation is still largely a domestic process.

show abstract

Section: Globalization and Inflation Dynamics: The Arguments And Prev...mentioning

confidence: 99%

Section: Cpi Inflation Domestic and Global Variables: Have The Relati...mentioning

confidence: 99%

mentioning

confidence: 99%

mentioning

confidence: 99%

See 2 more Smart Citations

Inflation Dynamics: Dead, Dormant, or Determined Abroad?

Forbes

2019

SSRN Journal

View full text Add to dashboard Cite

show abstract

“…Ihrig et al (2010) andMikolajun and Lodge (2016) …nd no evidence that foreign activity variables directly enter domestic Phillips curves.…”

mentioning

confidence: 98%

Global Dimensions of U.S. Monetary Policy

Obstfeld

2019

View full text Add to dashboard Cite

This paper is a partial exploration of mechanisms through which global factors influence the tradeoffs that U.S. monetary policy faces. It considers three main channels. The first is the determination of domestic inflation in a context where international prices and global competition play a role, alongside domestic slack and inflation expectations. The second channel is the determination of asset returns (including the natural real safe rate of interest, r*) and financial conditions, given integration with global financial markets. The third channel, which is particular to the United States, is the potential spillback onto the U.S. economy from the disproportionate impact of U.S. monetary policy on the outside world. In themselves, global factors need not undermine a central bank's ability to control the price level over the long term --after all, it is the monopoly issuer of the numeraire in which domestic prices are measured. Over shorter horizons, however, global factors do change the tradeoff between price-level control and other goals such as low unemployment and financial stability, thereby affecting the policy cost of attaining a given price path.

show abstract

The global component of inflation volatility

Carriero

Corsello

Marcellino

2022

J of Applied Econometrics

View full text Add to dashboard Cite

Summary Global developments play an important role for domestic inflation rates. Earlier literature has found that a substantial amount of the variation in a large set of national inflation rates can be explained by a single global factor. However, inflation volatility has been typically neglected, although it is clearly relevant both from a policy point of view and for structural analysis and forecasting. We study the evolution of inflation rates in several countries, using a novel model that allows for commonality in both levels and volatilities, in addition to country‐specific components. We find that inflation volatility is indeed important, and a substantial fraction of it can be attributed to a global factor that is also driving inflation levels and their persistence. The extent of commonality among core inflation rates and volatilities is substantially smaller than for overall inflation, which leaves scope for national monetary policies. Finally, we show that the point and density forecasting performance of the model is good relative to standard benchmarks, which provides additional evidence on its reliability.

show abstract

Advanced Economy Inflation: The Role of Global Factors

Cited by 19 publications

References 26 publications

Inflation Dynamics: Dead, Dormant, or Determined Abroad?

Inflation Dynamics: Dead, Dormant, or Determined Abroad?

Global Dimensions of U.S. Monetary Policy

The global component of inflation volatility

Contact Info

Product

Resources

About