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Global inflation dynamics

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  • Craig S. Hakkio

Abstract

This paper examines the dynamics of various measures of national, regional, and global inflation. The paper calculates the first two common factors for four measures of industrial country inflation rates: total CPI, core CPI, cyclical total CPI, and cyclical core CPI. The paper then demonstrates that the first common factor is sometimes helpful in forecasting national inflation rates. It also shows that the second common factor and the first common factor for cyclical inflation is sometimes helpful in forecasting national CPI inflation rates. Finally, the paper suggests that the commonality of industrial inflation rates reflects the commonality of the determinants of inflation.

Suggested Citation

  • Craig S. Hakkio, 2009. "Global inflation dynamics," Research Working Paper RWP 09-01, Federal Reserve Bank of Kansas City.
    • Handle: RePEc:fip:fedkrw:rwp09-01
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    File URL: https://www.kansascityfed.org/documents/457/pdf-rwp09-01.pdf
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    References listed on IDEAS

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    1. Kenneth S. Rogoff, 2003. "Globalization and global disinflation," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 77-112.
    2. Andrew T. Levin & Jeremy M. Piger, 2003. "Is inflation persistence intrinsic in industrial economies?," Working Papers 2002-023, Federal Reserve Bank of St. Louis.
    3. Stock, James H. & Watson, Mark W., 1999. "Forecasting inflation," Journal of Monetary Economics, Elsevier, vol. 44(2), pages 293-335, October.
    4. Matteo Ciccarelli & Benoît Mojon, 2010. "Global Inflation," The Review of Economics and Statistics, MIT Press, vol. 92(3), pages 524-535, August.
    5. William T. Gavin & Kevin L. Kliesen, 2008. "Forecasting inflation and output: comparing data-rich models with simple rules," Review, Federal Reserve Bank of St. Louis, vol. 90(May), pages 175-192.
    6. Claudio E. V. Borio & Andrew Filardo, 2007. "Globalisation and inflation: New cross-country evidence on the global determinants of domestic inflation," BIS Working Papers 227, Bank for International Settlements.
    7. Laurence M. Ball, 2006. "Has Globalization Changed Inflation?," NBER Working Papers 12687, National Bureau of Economic Research, Inc.
    8. Stock, James H & Watson, Mark W, 2002. "Macroeconomic Forecasting Using Diffusion Indexes," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 147-162, April.
    9. Corvoisier, Sandrine & Mojon, Benoît, 2005. "Breaks in the mean of inflation: how they happen and what to do with them," Working Paper Series 451, European Central Bank.
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    Cited by:

    1. Pincheira, Pablo M. & West, Kenneth D., 2016. "A comparison of some out-of-sample tests of predictability in iterated multi-step-ahead forecasts," Research in Economics, Elsevier, vol. 70(2), pages 304-319.
    2. Rösl, Gerhard & Seitz, Franz, 2021. "Cash and crises: No surprises by the virus," IMFS Working Paper Series 150, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).
    3. Aleksandra Halka & Grzegorz Szafranski, 2018. "What Common Factors are Driving Inflation in CEE Countries?," Prague Economic Papers, Prague University of Economics and Business, vol. 2018(2), pages 131-148.

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