GEP Research Paper 09/22
Key elements of global inflation
Robert Anderton, Alessandro Galesi, Marco Lombardi and Filippo di Mauro
Summary
This paper examines key factors affecting OECD inflation over a long sample period. We find that various structural factors - perhaps partly due to globalisation - in addition to monetary policy, may be behind changes in the inflation process.
Abstract
Against the background of large fluctuations in world commodity prices and global growth, combined with ongoing structural changes relating to globalization, this paper examines some of the key factors affecting global inflation. The paper empirically investigates various relative price and structural impacts on global inflation by: estimating a GVAR to examine how oil price shocks feed through to core and headline inflation; calculating the impact of increased imports from low-cost countries on manufacturing import prices; estimating Phillips curves in order to shed light on whether the inflationary process in the OECD countries has changed over time, particularly with respect to the roles of import prices, unit labour costs and the output gap. Overall, the paper finds that there seem to be various significant pressures on global trade prices and labour markets associated with structural factors possibly partly due to globalisation which, in addition to monetary policy, seem to be behind some of the changes in the inflation process over the period examined in this paper.
Issued in October 2009
This paper is available in PDF format