What is the Globalisation of Inflation?

40 Pages Posted: 22 Sep 2016

See all articles by Gantungalag Altansukh

Gantungalag Altansukh

Bank of Mongolia

Ralf Becker

University of Manchester

George J. Bratsiotis

University of Manchester

Denise R. Osborn

University of Manchester - School of Social Sciences; University of Tasmania

Date Written: July 25, 2016

Abstract

This paper studies the globalisation of CPI inflation by analysing core, energy and food components, testing for structural breaks in the relationships between domestic inflation and a corresponding country-specific foreign inflation series at the monthly frequency for OECD countries. The iterative methodology employed separates coefficient and variance breaks, while also taking account of outliers. We find that the overall pattern of globalisation in aggregate inflation is largely driven by convergence of the mean levels of the core component from the early 1990s, compatible with the introduction of inflation targeting in many countries of our sample. There is less evidence of increased synchronisation of short-run movements in core than aggregate inflation, but an increased role for short run foreign energy inflation often contributes to the globalisation effect.

Keywords: International inflation, globalisation, Co-movement, core inflation, multiple structural breaks

JEL Classification: C32, E31

Suggested Citation

Altansukh, Gantungalag and Becker, Ralf and Bratsiotis, George John and Osborn, Denise R., What is the Globalisation of Inflation? (July 25, 2016). Available at SSRN: https://ssrn.com/abstract=2841703 or http://dx.doi.org/10.2139/ssrn.2841703

Gantungalag Altansukh

Bank of Mongolia ( email )

Baga Toiruu-3, 15160
Ulaanbaatar, 46
Mongolia

Ralf Becker

University of Manchester ( email )

School of Social Sciences
Manchester M13 9PL
United Kingdom

George John Bratsiotis (Contact Author)

University of Manchester ( email )

Oxford Road
Manchester, N/A M13 9PL
United Kingdom

Denise R. Osborn

University of Manchester - School of Social Sciences ( email )

Oxford Road
Manchester, M13 9PL
United Kingdom

University of Tasmania ( email )

French Street
Sandy Bay
Tasmania, 7250
Australia

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