We estimate the contribution of international common factors to the dynamics of price inflation rates of a cross-section of 948 CPI products in four OECD countries: US, Germany, France, and UK. We find two main results. First, on average, and at least in the sample 1991-2004, one international common factor explains between 15 and 30 percent of the variance of consumer prices (depending on the transformation applied to the data). Given the high level of disaggregation of our panel, this estimate is best viewed as a lower bound for the contribution of international factors to inflation dynamics. Second, we find a strongly positive and statistically significant relationship between exposure of consumer inflation to international shocks and trade openness at the sectoral level. The latter result holds regardless of whether the original data are expressed in local as opposed to common currency.

The international dimension of inflation: evidence from disaggregated consumer price data

Monacelli, Tommaso;Sala, Luca
2009

Abstract

We estimate the contribution of international common factors to the dynamics of price inflation rates of a cross-section of 948 CPI products in four OECD countries: US, Germany, France, and UK. We find two main results. First, on average, and at least in the sample 1991-2004, one international common factor explains between 15 and 30 percent of the variance of consumer prices (depending on the transformation applied to the data). Given the high level of disaggregation of our panel, this estimate is best viewed as a lower bound for the contribution of international factors to inflation dynamics. Second, we find a strongly positive and statistically significant relationship between exposure of consumer inflation to international shocks and trade openness at the sectoral level. The latter result holds regardless of whether the original data are expressed in local as opposed to common currency.
2009
2009
Monacelli, Tommaso; Sala, Luca
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11565/1249391
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