Inflation: Concepts, Evolution, and Correlates

Abstract

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

Inflation During the Pandemic: What Happened? What is Next?

“…The widely shared disinflation in advanced economies has been attributed partly to changes in monetary policy regimes, including the increased focus on price stability, which took hold during the early 1980s (Cecchetti et al 2007;Levin and Piger 2004). Other factors may have included sounder fiscal policies, deregulation, globalization, growing global labor forches, and, in the 1990s, bouts of rapid productivity growth in some parts of the world (Goodhart and Pradhan 2020;Ha et al 2019a;Rogoff 2003).…”

“…Disinflation at that time mainly reflected an unwinding of earlier shocks-the oil price spike of 1974 and the inflationary impact of wage and consumer price controls being lifted, accompanied by the collapse of the Bretton Woods fixed exchange rate system in 1971. The large role of oil price shocks in core CPI inflation dynamics-notwithstanding the exclusion of energy from the core inflation aggregate-in the 1970s may also have reflected poorly anchored inflation expectations once the nominal anchor of the Bretton Woods fixed exchange rate regimes was lost (Ha et al 2019a).…”

“…Such robust anchoring of inflation expectations in part reflected the introduction of more resilient macroeconomic policy frameworks such as inflation targeting, fiscal rules, and greater exchange rate flexibility in EMDEs (Ha, Kose, and Ohnsorge 2019). The median EMDE inflation target has remained steady at around 4 percent since the mid-2010s but the number of EMDEs meeting their targets has risen (Ha et al 2019a). If, however, inflation expectations start de-anchoring from central banks' targets, inflation can rise in unexpected ways in the medium-term (Armantier et al 2020).…”

Modeling the Trend, Persistence, and Volatility of Inflation in Pacific Alliance Countries: An Empirical Application Using a Model with Inflation Bands

“…Research on inflation volatility in PA countries identify the "Great Moderation" of inflation, namely the reduction in inflation volatility in the 1990s and early 2000s (Singh, 2006;Castillo et al, 2012;Castillo et al, 2016;Ha et al, 2019). Broto (2011) uses an autoregressive conditional heteroskedasticity model to analyze inflation volatility in the region and concludes that IT has led to a reduction in both the level of inflation and its volatility.…”

Emerging and Developing Economies: Ten Years After the Global Recession

“…2 The global recession of 1975 followed the shock to global oil prices triggered by the Arab oil embargo in October 1973. Although the embargo ended in March 1974, the supply shock associated with the sharp rise in oil prices quickly translated into a substantial increase in inflation and a significant decline in growth in many countries (Ha et al 2019a). Monetary and fiscal policy easing, especially by advanced economies, helped spur a rebound of growth in 1976, but also ushered in an era of stagflation with disappointing growth but high and unstable inflation.…”