Global inflation before and after the covid-19 pandemic: a panel data approach

The main objective of this article is to investigate the global inflation rate behavior before and after the Covid-19 pandemic and the beginning of Russia-Ukraine War, for a panel of 42 advanced and emerging market countries, representing all regions of the world. By making use the System GMM econometric methodology, our quarterly data ranges from 2016Q1 to 2023Q4, but will also divide the data in two subsamples, ranging from 2016Q1 to 2019Q4, and from 2020Q1 to 2023Q4. The estimated global inflation empirical models indicate that: i) for the whole period there is evidence of inflation inertia and significance for oil price; ii) GDP gap has an important role for the post-Covid-19/War period and for the sample of countries below average with positive coefficient; iii) there is partial evidence of exchange rate passthrough to inflation and only for the post Covid-19/War period, but the deflationary process caused by the exchange rate dynamics has not been enough to contribute to an effective global inflation control after 2020; iv) food and oil prices have positive and statistically significant impact in the post-Covid-19/War period and have similar effects for countries below and above GDP average; v) Global supply chain pressures helped to mitigate inflation, before the pandemic, but contributed significantly to the global inflation surge after the outbreak; vi) there is no evidence of exchange rate non-linearity.