IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

International transmission of inflation among G-7 countries: A data-determined VAR analysis

  • Yang, Jian
  • Guo, Hui
  • Wang, Zijun

We investigate the international transmission of inflation among G-7 countries using a data-determined vector autoregression analysis, as advocated by Swanson and Granger (1997). Over the period 1973 to 2003, we find that U.S. innovations have a large effect on inflation in the other countries, although they are not always the dominant international factor. Similarly, shocks to some other countries also have a statistically and economically significant influence on U.S. inflation. Moreover, our evidence indicates that U.S. inflation has become less vulnerable to foreign shocks since the early 1990s, mainly because of the diminished influence from Germany and France

(This abstract was borrowed from another version of this item.)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 30 (2006)
Issue (Month): 10 (October)
Pages: 2681-2700

in new window

Handle: RePEc:eee:jbfina:v:30:y:2006:i:10:p:2681-2700
Contact details of provider: Web page:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Christiano, Lawrence J & Eichenbaum, Martin & Evans, Charles, 1996. "The Effects of Monetary Policy Shocks: Evidence from the Flow of Funds," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 16-34, February.
  2. Christopher A. Sims, 1986. "Are forecasting models usable for policy analysis?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-16.
  3. Clarida, R. & Gali, J. & Gertler, M., 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and some Theory," Working Papers 98-01, C.V. Starr Center for Applied Economics, New York University.
  4. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  5. Richard Clarida & Jordi Gali & Mark Gertler, 1997. "Monetary Policy Rules in Practice: Some International Evidence," NBER Working Papers 6254, National Bureau of Economic Research, Inc.
  6. Yin-Wong Cheung & Jude Yuen, 2002. "Effects of U.S. Inflation on Hong Kong and Singapore," CESifo Working Paper Series 700, CESifo Group Munich.
  7. Schwert, G William, 1989. "Tests for Unit Roots: A Monte Carlo Investigation," Journal of Business & Economic Statistics, American Statistical Association, vol. 7(2), pages 147-59, April.
  8. Johnson, David R., 2002. "The effect of inflation targeting on the behavior of expected inflation: evidence from an 11 country panel," Journal of Monetary Economics, Elsevier, vol. 49(8), pages 1521-1538, November.
  9. Swanson, N.R. & Granger, C.W.J., 1994. "Impulse Response Functions Based on Causal Approach to Residual Orthogonalization in Vector Autoregressions," Papers 9-94-1, Pennsylvania State - Department of Economics.
  10. Eun, Cheol S. & Jeong, Jin-Gil, 1999. "International price level linkages: Evidence from the post-Bretton Woods era," Pacific-Basin Finance Journal, Elsevier, vol. 7(3-4), pages 331-349, August.
  11. Kevin Hoover & Selva Demiralp, 2003. "Searching for the Causal Structure of a Vector Autoregression," Working Papers 33, University of California, Davis, Department of Economics.
  12. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
  13. Uctum, Merih, 1999. "European integration and asymmetry in the EMS," Journal of International Money and Finance, Elsevier, vol. 18(5), pages 769-798, October.
  14. Gianluca Benigno & Pierpaolo Benigno, 2003. "Price Stability in Open Economies," Review of Economic Studies, Wiley Blackwell, vol. 70(4), pages 743-764, October.
  15. Clarida, Richard & Gali, Jordi & Gertler, Mark, 2002. "A simple framework for international monetary policy analysis," Journal of Monetary Economics, Elsevier, vol. 49(5), pages 879-904, July.
  16. Michael R. Darby & James R. Lothian & Arthur E. Gandolfi & Anna J. Schwartz & Alan C. Stockman, 1983. "The International Transmission of Inflation," NBER Books, National Bureau of Economic Research, Inc, number darb83-1, July.
  17. Ben S. Bernanke, 1986. "Alternative Explanations of the Money-Income Correlation," NBER Working Papers 1842, National Bureau of Economic Research, Inc.
  18. Michael Woodford, 2004. "Inflation targeting and optimal monetary policy," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 15-42.
  19. Òscar Jordà, 2005. "Estimation and Inference of Impulse Responses by Local Projections," American Economic Review, American Economic Association, vol. 95(1), pages 161-182, March.
  20. Bessler, David A. & Yang, Jian, 2003. "The structure of interdependence in international stock markets," Journal of International Money and Finance, Elsevier, vol. 22(2), pages 261-287, April.
  21. Jian Yang & David A. Bessler, 2004. "The International Price Transmission in Stock Index Futures Markets," Economic Inquiry, Western Economic Association International, vol. 42(3), pages 370-386, July.
  22. Michael B. Devereux & Charles Engel, 2002. "Exchange Rate Pass-Through, Exchange Rate Volatility, and Exchange Rate Disconnect," NBER Working Papers 8858, National Bureau of Economic Research, Inc.
  23. Hoover, Kevin D., 2003. "Some causal lessons from macroeconomics," Journal of Econometrics, Elsevier, vol. 112(1), pages 121-125, January.
  24. Lars E. O. Svensson, 2000. "Open-Economy Inflation Targeting," NBER Working Papers 6545, National Bureau of Economic Research, Inc.
  25. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
  26. Crowder, William J., 1996. "The international convergence of inflation rates during fixed and floating exchange rate regimes," Journal of International Money and Finance, Elsevier, vol. 15(4), pages 551-575, August.
  27. Granger, Clive W. J., 2003. "Some aspects of causal relationships," Journal of Econometrics, Elsevier, vol. 112(1), pages 69-71, January.
  28. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
  29. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
  30. Stock, James H. & Watson, Mark W., 1999. "Forecasting inflation," Journal of Monetary Economics, Elsevier, vol. 44(2), pages 293-335, October.
  31. Michael R. Darby & James Lothian, 1989. "The International Transmission of Inflation Afloat," NBER Chapters, in: Money, History, and International Finance: Essays in Honor of Anna J. Schwartz, pages 203-244 National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:jbfina:v:30:y:2006:i:10:p:2681-2700. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.