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Evolving international inflation dynamics: evidence from a time-varying dynamic factor model

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  • Haroon Mumtaz
  • Paolo Surico

Abstract

Several industrialised countries have had a similar inflation experience in the past 30 years, with inflation high and volatile in the 1970s and the 1980s but low and stable in the most recent period. We explore the dynamics of inflation in these countries via a time-varying factor model. This statistical model is used to describe movements in inflation that are idiosyncratic or country specific and those that are common across countries. In addition, we investigate how comovement has varied across the sample period. Our results indicate that there has been a decline in the level, persistence and volatility of inflation across our sample of industrialised countries. In addition, there has been a change in the degree of comovement, with the level and persistence of national inflation rates moving more closely together since the mid-1980s.

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  • Haroon Mumtaz & Paolo Surico, 2008. "Evolving international inflation dynamics: evidence from a time-varying dynamic factor model," Bank of England working papers 341, Bank of England.
    • Handle: RePEc:boe:boeewp:341
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Forecasting National Inflation Rates
      by Robert Balaban in St. Louis Fed On the Economy on 2014-08-21 15:00:38
    2. Forecasting National Inflation Rates
      by Guest Author in The Big Picture on 2014-08-24 14:00:24

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    1. Vito Polito & Peter Spencer, "undated". "UK Macroeconomic Volatility and the Welfare Costs of Inflation," Discussion Papers 11/21, Department of Economics, University of York.
    2. Mumtaz, Haroon & Theodoridis, Konstantinos, 2017. "Common and country specific economic uncertainty," Journal of International Economics, Elsevier, vol. 105(C), pages 205-216.
    3. Qin, Duo & He, Xinhua, 2013. "Globalisation effect on inflation in the Great Moderation era: New evidence from G10 countries," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 7, pages 1-32.
    4. Haroon Mumtaz & Paolo Surico, 2009. "Time-varying yield curve dynamics and monetary policy," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(6), pages 895-913.
    5. Mandalinci, Zeyyad, 2017. "Forecasting inflation in emerging markets: An evaluation of alternative models," International Journal of Forecasting, Elsevier, vol. 33(4), pages 1082-1104.
    6. Chiu, Adrian & Wieladek, Tomasz, 2012. "Did output gap measurement improve over time?," Discussion Papers 36, Monetary Policy Committee Unit, Bank of England.
    7. Felices, Guillermo & Wieladek, Tomasz, 2012. "Are emerging market indicators of vulnerability to financial crises decoupling from global factors?," Journal of Banking & Finance, Elsevier, vol. 36(2), pages 321-331.
    8. Henriksen, Espen & Kydland, Finn & Sustek, Roman, 2008. "The High Cross-Country Correlations of Prices and Interest Rates," MPRA Paper 10963, University Library of Munich, Germany.
    9. Filippo Ferroni & Benjamin Klaus, 2015. "Euro Area business cycles in turbulent times: convergence or decoupling?," Applied Economics, Taylor & Francis Journals, vol. 47(34-35), pages 3791-3815, July.
    10. Colin Ellis & Haroon Mumtaz & Pawel Zabczyk, 2014. "What Lies Beneath? A Time‐varying FAVAR Model for the UK Transmission Mechanism," Economic Journal, Royal Economic Society, vol. 0(576), pages 668-699, May.
    11. Matthew Doyle & Jean-Paul Lam, 2010. "Is the New Keynesian Explanation of the Great Dis-Inflation Consistent with the Cross Country Data?," Working Papers 1010, University of Waterloo, Department of Economics, revised Oct 2010.
    12. Özer Karagedikli & Haroon Mumtaz & Misa Tanaka, 2010. "All together now: Do international factors explain relative price co-movements?," Reserve Bank of New Zealand Discussion Paper Series DP2010/02, Reserve Bank of New Zealand.
    13. Knut Are Aastveit & Hilde C. Bjørnland & Leif Anders Thorsrud, 2016. "The World Is Not Enough! Small Open Economies and Regional Dependence," Scandinavian Journal of Economics, Wiley Blackwell, vol. 118(1), pages 168-195, January.
    14. Andrea Carriero & Francesco Corsello & Massimiliano Marcellino, 2018. "The global component of inflation volatility," Temi di discussione (Economic working papers) 1170, Bank of Italy, Economic Research and International Relations Area.
    15. Felices, Guillermo & Wieladek, Tomasz, 2011. "Are EME indicators of vulnerability to financial crises decoupling from global factors?," Bank of England working papers 410, Bank of England.
    16. Christopher J. Neely & David E. Rapach, 2008. "Is inflation an international phenomenon?," Working Papers 2008-025, Federal Reserve Bank of St. Louis.
    17. Sandra Eickmeier & Katharina Pijnenburg, 2013. "The Global Dimension of Inflation – Evidence from Factor-Augmented Phillips Curves," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 75(1), pages 103-122, February.
    18. Leif Anders Thorsrud, 2013. "Global and regional business cycles. Shocks and propagations," Working Papers No 3/2013, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
    19. Márcio Laurini & João Frois Caldeira, 2012. "Some Comments on a Macro-Finance Model with Stochastic Volatility," IBMEC RJ Economics Discussion Papers 2012-04, Economics Research Group, IBMEC Business School - Rio de Janeiro.
    20. Francesco Bianchi & Andrea Civelli, 2013. "Globalization and Inflation: Structural Evidence from a Time Varying VAR Approach," Working Papers 13-20, Duke University, Department of Economics.
    21. Roman Sustek & Finn Kydland & Espen Henriksen, 2008. "The High Correlations of Prices and Interest Rates across Nations," 2008 Meeting Papers 773, Society for Economic Dynamics.

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    More about this item

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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