Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154381
Authors: 
Mikolajun, Irena
Lodge, David
Year of Publication: 
2016
Series/Report no.: 
ECB Working Paper 1948
Abstract: 
A number of studies document the prominent role of global factors in domestic inflation developments (e.g. Borio and Filardo, 2007; Ciccarelli and Mojon, 2010). In this paper we investigate global dimensions of advanced economy inflation. We estimate open-economy Phillips curves for 19 advanced economies. We include backwardand forward-looking survey measures of inflation expectations and augment Phillips curves with global factors including global economic slack, global inflation and commodity prices. Our results provide little support for the existence of direct effects of global economic slack on domestic inflation. Moreover, the results suggest that the importance of global inflation in forecasting domestic inflation has its roots solely in its ability to capture slow-moving trends in inflation rates. In the Phillips curve context much the same role is performed by domestic forward-looking inflation expectations. With the exception of commodity prices therefore our results reveal little reason to include global factors into traditional reduced form Phillips curves.
Subjects: 
advanced economies
forecasting
global economic slack
global inflation
inflation
Phillips curve
JEL: 
E31
E32
E37
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-2196-1
Document Type: 
Working Paper

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