Is Digitalization Driving Domestic Inflation?

46 Pages Posted: 22 Jan 2020

See all articles by Balazs Csonto

Balazs Csonto

International Monetary Fund (IMF)

Yuxuan Huang

George Washington University

Camilo E. Tovar

International Monetary Fund

Date Written: December 2019

Abstract

This paper examines the extent to which digitalization-measured by a new proxy based on IP addresses allocations per country-has influenced inflation dynamics in a sample of 36 advanced and emerging economies over 2000-2017. Phillips curve estimates show that digitalization has a statistically significant negative effect on inflation in the short run. Its economic impact is not large but has increased since 2012 and mainly operates through a cost/competition channel. Principal components and cointegration analysis further suggest digitalization is a key driver of lower trend inflation.

Keywords: Consumer price indexes, Nominal effective exchange rate, Price indexes, Purchasing power parity, Commodity price indexes, Inflation, Digitalization, IP Address, Internet., WP, Phillips curve, inflation expectation, output gap, principal component

JEL Classification: E31, E58, F62, L86, E01, C43, Q02, D4

Suggested Citation

Csonto, Balazs and Huang, Yuxuan and Tovar, Camilo E., Is Digitalization Driving Domestic Inflation? (December 2019). IMF Working Paper No. 19/271, Available at SSRN: https://ssrn.com/abstract=3523144

Balazs Csonto (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Yuxuan Huang

George Washington University ( email )

2121 I Street NW
Washington, DC 20052
United States

Camilo E. Tovar

International Monetary Fund ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

HOME PAGE: http://blog-imfdirect.imf.org/bloggers/camilo-e-tovar/

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
70
Abstract Views
412
rank
453,935
PlumX Metrics