Inflation as a Global Phenomenon - Some Implications for Policy Analysis and Forecasting

53 Pages Posted: 28 Jan 2016 Last revised: 3 Jun 2017

See all articles by Ayşe Kabukcuoglu Dur

Ayşe Kabukcuoglu Dur

North Carolina State University; North Carolina State University - Department of Economics

Enrique Martínez-García

Federal Reserve Bank of Dallas - Research Department

Multiple version iconThere are 2 versions of this paper

Date Written: January, 2016

Abstract

We evaluate the performance of inflation forecasts based on the open-economy Phillips curve by exploiting the spatial pattern of international propagation of inflation. We model these spatial linkages using global inflation and either domestic slack or oil price fluctuations, motivated by a novel interpretation of the forecasting implications of the workhorse openeconomy New Keynesian model (Martnez-Garca and Wynne (2010), Kabukcuoglu and Martnez-Garca (2014)). We find that incorporating spatial interactions yields significantly more accurate forecasts of local inflation in 14 advanced countries (including the U.S.) than a simple autoregressive model that captures only the temporal dimension of the inflation dynamics.

JEL Classification: C21, C23, C53, F41, F62

Suggested Citation

Kabukçuoğlu Dur, Ayşe and Kabukçuoğlu Dur, Ayşe and Martinez-Garcia, Enrique, Inflation as a Global Phenomenon - Some Implications for Policy Analysis and Forecasting (January, 2016). Available at SSRN: https://ssrn.com/abstract=2723121 or http://dx.doi.org/10.24149/gwp261

Ayşe Kabukçuoğlu Dur (Contact Author)

North Carolina State University ( email )

2801 Founders Dr
Raleigh, NC 27695
United States

HOME PAGE: http://aysekabukcuoglu.weebly.com

North Carolina State University - Department of Economics ( email )

Raleigh, NC 27695-8110
United States

HOME PAGE: http://aysedur.com

Enrique Martinez-Garcia

Federal Reserve Bank of Dallas - Research Department ( email )

2200 North Pearl Street
PO Box 655906
Dallas, TX 75265-5906
United States
214-922-5262 (Phone)

HOME PAGE: http://sites.google.com/view/emgeconomics

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