Three facts about global inflation

This paper introduces an internally consistent approach to measure the global economy with indexes of inflation, growth and currency movements, which together account for the changing rankings of countries. This leads to three key patterns. First, global inflation above a modest threshold comes with more cross-country raggedness or dispersion, meaning more uncertainty in the world. The minimum-variance rate of global inflation follows from this, together with the “natural rate” of cross-country dispersion. Second, countries’ propensity to import inflation differs substantially. High-inflation countries tend to be more susceptible to global inflation, while more affluent ones are more insulated. Surprisingly, the economic size of a country seems to have no impact on the transmission of inflation. Finally, using a Markov-chain approach and more traditional measures, inflation is found to be surprisingly fluid, not sticky.