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International comovements, business cycle and inflation: a historical perspective

  • Mumtaz, Haroon


    (Monetary Policy Committee Unit, Bank of England)

  • Simonelli, Saverio


    (Monetary Policy Committee Unit, Bank of England)

  • Surico, Paolo


    (Monetary Policy Committee Unit, Bank of England)

Using a dynamic factor model, we uncover four main empirical or international comovements in a long-run panel of real and nominal variables. First, the countribution of world comovements to domestic output growth has decreased over the post-WWII period. The contribution of regional comovements, however, has increased significantly. Second, the share of inflation variation due to a global factor has become larger since 1985. Third, over most of the post-WWII period, international comovements within regions have accounted for the bulk of fluctuations in business cycle and inflation. Fourth, prices have become significantly less countercyclical during the post-1984 sample, with the largest contribution due to external developments.

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Paper provided by Monetary Policy Committee Unit, Bank of England in its series Discussion Papers with number 28.

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Length: 35 pages
Date of creation: 01 Jul 2009
Date of revision:
Handle: RePEc:mpc:wpaper:0028
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