Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/71905
Authors: 
Eickmeier, Sandra
Kühnlenz, Markus
Year of Publication: 
2013
Series/Report no.: 
Discussion Paper, Deutsche Bundesbank 07/2013
Abstract: 
We apply a structural dynamic factor model to a large quarterly dataset covering 38 countries between 2002 and 2011 to analyze China's role in global inflation dynamics. We identify Chinese supply and demand shocks and examine their contributions to global price dynamics and the transmission mechanism. Our main findings are: (i) Chinese supply and demand shocks affect prices in other countries significantly. Demand shocks matter slightly more than supply shocks. Producer prices tend to be more strongly affected than consumer prices by Chinese shocks. The overall share of international inflation explained by Chinese shocks is notable (about 5 percent on average over all countries but not more than 13 percent in each region); (ii) Direct channels (via import and export prices) and indirect channels (via greater exposure to foreign competition and commodity prices) seem both to matter; (iii) Differences in trade (overall and with China) and in commodity exposure help explaining crosscountry differences in price responses.
Subjects: 
global inflation
China
international business cycles
structural dynamic factor model
sign restrictions
JEL: 
F41
E31
C3
ISBN: 
978-3-86558-892-0
Document Type: 
Working Paper

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