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Who leads the inflation cycle in Europe? Inflation cycle and spillover influence among Eurozone and non-Eurozone economies

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  • Sang Hoon Kang
  • Jose Arreola Hernandez
  • Seong-Min Yoon

Abstract

This paper investigates co-influences between inflation cycles of the economies of four Eurozone countries (France, Germany, Spain, and Italy), the United Kingdom (U.K.), and four non-Eurozone countries (Sweden, Denmark, Norway, and Switzerland) by fitting a wavelet-based measure of synchronisation and a directional spillover index. We find evidence of short- and medium-term inflation cycle synchronicity and anticyclical inflation cycle co-movements among the U.K. and the Eurozone and non-Eurozone economies under consideration. The synchronicity of the inflation cycle is more accentuated than the joint anticyclical inflation effects. Inflation cycles of the U.K. and the largest selected Eurozone economies are observed to lead those of the selected non-Eurozone economies. The U.K.‘s inflation cycle, followed by that of Italy, most noticeably influences those of non-Eurozone economies. The inflation cycles of France, Sweden, and Germany are the largest spillover transmitters, while those of Italy and the U.K. are the largest spillover receivers across the Eurozone and non-Eurozone countries under consideration.

Suggested Citation

  • Sang Hoon Kang & Jose Arreola Hernandez & Seong-Min Yoon, 2019. "Who leads the inflation cycle in Europe? Inflation cycle and spillover influence among Eurozone and non-Eurozone economies," International Economics, CEPII research center, issue 160, pages 56-71.
  • Handle: RePEc:cii:cepiie:2019-q4-160-6
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    Cited by:

    1. Umar, Zaghum & Riaz, Yasir & Aharon, David Y., 2022. "Network connectedness dynamics of the yield curve of G7 countries," International Review of Economics & Finance, Elsevier, vol. 79(C), pages 275-288.

    More about this item

    Keywords

    Inflation cycle synchronisation; Wavelet transformation; Directional spillover index; European countries;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

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