Arbeitspapier
Local Inflation: Reconsidering the International Comovement of Inflation
In this paper we reconsider the degree of international comovement of inflation rates. We use a dynamic hierarchical factor model that is able to decompose Consumer Price Index (CPI) inflation in a panel of countries into (i) a factor common to all inflation series and all countries, (ii) a factor specific to a given sub-section of the CPI, (iii) a country group-factor and (iv) a country-specific component. With its pyramidal structure, the model allows for the possibility that the global factor affects the country-group factor and other subordinated factors but not vice versa. Using quarterly data for industrialized and emerging economies from 1996 to 2011 we find that about two thirds of overall inflation volatility are due to country-specific determinants. For CPI inflation net of food and energy, the global factor and the CPI basketspecific factor account for less than 20% of inflation variation. We argue that local inflation rather than global inflation (Ciccarelli and Mojon (2010)) is a better description of the evidence. Only energy price inflation in industrial economies is dominated by common factors.
- Language
-
Englisch
- Bibliographic citation
-
Series: MAGKS Joint Discussion Paper Series in Economics ; No. 03-2013
- Classification
-
Wirtschaft
Price Level; Inflation; Deflation
Business Fluctuations; Cycles
International Business Cycles
- Subject
-
Inflation
Energy Prices
Monetary Policy
Globalization
Dynamic Hierarchical Factor Model
- Event
-
Geistige Schöpfung
- (who)
-
Förster, Marcel
Tillmann, Peter
- Event
-
Veröffentlichung
- (who)
-
Philipps-University Marburg, Faculty of Business Administration and Economics
- (where)
-
Marburg
- (when)
-
2013
- Handle
- Last update
-
10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Förster, Marcel
- Tillmann, Peter
- Philipps-University Marburg, Faculty of Business Administration and Economics
Time of origin
- 2013
Other Objects (12)
Exchange rate shocks and inflation comovement in the euro area
Tail co-movement in inflation expectations as an indicator of anchoring
Inflation co-movement across countries in multi-maturity term structure: An arbitrage-free approach
Effects of Inflation Expectations on Inflation
Inflation risks and inflation risk premia
Do Inflation Expectations Granger Cause Inflation?
Household inflation expectations and inflation dynamics
Inflation Forecasting with Inflation Sentiment Indicators
Estimating inflation expectation co-movement across countries
Monetary policy, trend inflation and inflation Persistence
Inflation decomposition model: Application to Macedonian inflation
Inflation dynamics when inflation is near zero
Exchange rate shocks and inflation comovement in the euro area
Tail co-movement in inflation expectations as an indicator of anchoring
Inflation co-movement across countries in multi-maturity term structure: An arbitrage-free approach
Effects of Inflation Expectations on Inflation
Inflation risks and inflation risk premia
Do Inflation Expectations Granger Cause Inflation?
Household inflation expectations and inflation dynamics
Inflation Forecasting with Inflation Sentiment Indicators
Estimating inflation expectation co-movement across countries
Monetary policy, trend inflation and inflation Persistence
Inflation decomposition model: Application to Macedonian inflation
Inflation dynamics when inflation is near zero
Exchange rate shocks and inflation comovement in the euro area
Tail co-movement in inflation expectations as an indicator of anchoring
Inflation co-movement across countries in multi-maturity term structure: An arbitrage-free approach
Effects of Inflation Expectations on Inflation
Inflation risks and inflation risk premia
Do Inflation Expectations Granger Cause Inflation?
Household inflation expectations and inflation dynamics
Inflation Forecasting with Inflation Sentiment Indicators
Estimating inflation expectation co-movement across countries
Monetary policy, trend inflation and inflation Persistence
Inflation decomposition model: Application to Macedonian inflation