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Is inflation a global phenomenon?

Author

Listed:
  • Matteo Ciccarelli
  • Benoit Mojon

Abstract

We show that inflation is largely a global phenomenon. First, inflation rates of 22 OECD countries have a common factor that alone accounts for nearly 70% of their variance. Second, Global Inflation is a function of real developments at short horizons and monetary developments at longer horizons. Third, there is a robust "Error Correction Mechanism" that brings national inflation rates back to Global Inflation. Preliminary results show that, by exploiting this mechanism, we can beat standard benchmarks used to forecast national inflation from 1 to 8 quarters ahead, across samples and countries. JEL Classification: E31, E37, F42

Suggested Citation

  • Matteo Ciccarelli & Benoit Mojon, 2005. "Is inflation a global phenomenon?," Research Bulletin, European Central Bank, vol. 3, pages 6-7.
    • Handle: RePEc:ecb:ecbrbu:2005:0003:2
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    File URL: http://www.ecb.europa.eu/pub/pdf/other/researchbulletin03en.pdf
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    Citations

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    Cited by:

    1. Martin Feldkircher & Gabriele Tondl, 2020. "Global Factors Driving Inflation and Monetary Policy: A Global VAR Assessment," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 26(3), pages 225-247, August.

    More about this item

    Keywords

    global inflation;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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