Inflation Beyond Borders: A Research Agenda

Prevailing theories explain inflation as a domestic process disturbed by exogenous shocks, an assumption that struggles to account for the strong cross-country synchronization of inflation visible both during the Great Moderation and in the post-2021 surge. We challenge this methodological nationalism and argue that domestic price dynamics are constrained or enabled by the international environment, through the distribution of power, monetary and financial institutions, and the interaction among economies. We distinguish our position from the "globe-centric" literature (Borio and Filardo, 2007; Auer et al., 2017): rather than rescaling a closed-economy Phillips curve to a single world economy, we treat inflation as emerging from the interaction among distinct but open economies. We show that the three canonical frameworks (monetarist, real-market, and conflict) remain analytically useful once recast at the international level, but imply very different cause-effect relations. We illustrate three candidate mechanisms: the erosion of labor's bargaining power, the asymmetric adjustment of the international monetary system, and financialization and global liquidity, with a review of the literature and descriptive evidence. We make no claim to causal identification; the paper sets out a research agenda and a set of falsifiable hypotheses for future work.