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Inflation comovements in advanced economies: Facts and drivers

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  • Luis J. Álvarez
  • Maria Dolores Gadea
  • Ana Gómez‐Loscos

Abstract

In this paper, we analyse inflation comovements and their macroeconomic drivers across a wide set of advanced economies. We find a high degree of inflation interdependence, which is highest for euro area countries, which show strong trade links and share a common monetary policy. In contrast, core inflation interdependence is very limited. We also find that inflation interconnectedness is a medium‐ to long‐run phenomenon. Inflation comovements across countries are well explained by an open economy new Keynesian Phillips curve.

Suggested Citation

  • Luis J. Álvarez & Maria Dolores Gadea & Ana Gómez‐Loscos, 2021. "Inflation comovements in advanced economies: Facts and drivers," The World Economy, Wiley Blackwell, vol. 44(2), pages 485-509, February.
    • Handle: RePEc:bla:worlde:v:44:y:2021:i:2:p:485-509
    DOI: 10.1111/twec.13053
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