IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v50y2022ics1544612322004901.html
   My bibliography  Save this article

Infection, invasion, and inflation: Recent lessons

Author

Listed:
  • Aharon, David Y.
  • Qadan, Mahmoud

Abstract

We examine the relationship between the ex-post inflation rates in the G7 countries, using a connectedness approach. Results obtained through both static and dynamic analyses confirm the US (Italy) as the main transmission (absorption) channel for inflation. Our dynamic analysis shows that the magnitude of inflation spillovers peaked during earlier market crises such as the 2008 subprime-crisis and the 2011 European debt-crisis. High level of connectedness is also witnessed during COVID-19 period and particularly surged due to the 2022 Russia-Ukraine conflict. The results may be important for corporate and national policymakers, seeking for monitoring and mapping the evolution of inflation.

Suggested Citation

  • Aharon, David Y. & Qadan, Mahmoud, 2022. "Infection, invasion, and inflation: Recent lessons," Finance Research Letters, Elsevier, vol. 50(C).
    • Handle: RePEc:eee:finlet:v:50:y:2022:i:c:s1544612322004901
    DOI: 10.1016/j.frl.2022.103307
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612322004901
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2022.103307?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Wang, Pengfei & Wen, Yi, 2007. "Inflation dynamics: A cross-country investigation," Journal of Monetary Economics, Elsevier, vol. 54(7), pages 2004-2031, October.
    2. Raphael A. Auer & Andrei A. Levchenko & Philip Sauré, 2019. "International Inflation Spillovers through Input Linkages," The Review of Economics and Statistics, MIT Press, vol. 101(3), pages 507-521, July.
    3. Chatziantoniou, Ioannis & Gabauer, David, 2021. "EMU risk-synchronisation and financial fragility through the prism of dynamic connectedness," The Quarterly Review of Economics and Finance, Elsevier, vol. 79(C), pages 1-14.
    4. Francis X. Diebold & Kamil Yilmaz, 2009. "Measuring Financial Asset Return and Volatility Spillovers, with Application to Global Equity Markets," Economic Journal, Royal Economic Society, vol. 119(534), pages 158-171, January.
    5. Diebold, Francis X. & Yılmaz, Kamil, 2014. "On the network topology of variance decompositions: Measuring the connectedness of financial firms," Journal of Econometrics, Elsevier, vol. 182(1), pages 119-134.
    6. Umar, Zaghum & Riaz, Yasir & Aharon, David Y., 2022. "Network connectedness dynamics of the yield curve of G7 countries," International Review of Economics & Finance, Elsevier, vol. 79(C), pages 275-288.
    7. Antonakakis, Nikolaos & Gabauer, David & Gupta, Rangan & Plakandaras, Vasilios, 2018. "Dynamic connectedness of uncertainty across developed economies: A time-varying approach," Economics Letters, Elsevier, vol. 166(C), pages 63-75.
    8. Montinari, Letizia & Stracca, Livio, 2016. "Trade, finance or policies: What drives the cross-border spill-over of business cycles?," Journal of Macroeconomics, Elsevier, vol. 49(C), pages 131-148.
    9. Altansukh, Gantungalag & Becker, Ralf & Bratsiotis, George J. & Osborn, Denise R., 2017. "What is the Globalisation of Inflation?," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 74, pages 1-27.
    10. Ciccarelli, Matteo & García, Juan Angel, 2021. "Expectation spillovers and the return of inflation," Economics Letters, Elsevier, vol. 209(C).
    11. Julian di Giovanni & Andrei A. Levchenko, 2010. "Putting the Parts Together: Trade, Vertical Linkages, and Business Cycle Comovement," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(2), pages 95-124, April.
    12. Gabauer, David, 2021. "Dynamic measures of asymmetric & pairwise connectedness within an optimal currency area: Evidence from the ERM I system," Journal of Multinational Financial Management, Elsevier, vol. 60(C).
    13. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-836, July.
    14. Aharon, David Y. & Demir, Ender, 2022. "NFTs and asset class spillovers: Lessons from the period around the COVID-19 pandemic," Finance Research Letters, Elsevier, vol. 47(PA).
    15. Mahmod Qadan & Joseph Yagil, 2015. "International co-movements of real and financial economic variables," Applied Economics, Taylor & Francis Journals, vol. 47(31), pages 3347-3366, July.
    16. Gregor Bäurle & Matthias Gubler & Diego R. Känzig, 2021. "International Inflation Spillovers: The Role of Different Shocks," International Journal of Central Banking, International Journal of Central Banking, vol. 17(1), pages 191-230, March.
    17. Koop, Gary & Pesaran, M. Hashem & Potter, Simon M., 1996. "Impulse response analysis in nonlinear multivariate models," Journal of Econometrics, Elsevier, vol. 74(1), pages 119-147, September.
    18. Diebold, Francis X. & Yilmaz, Kamil, 2012. "Better to give than to receive: Predictive directional measurement of volatility spillovers," International Journal of Forecasting, Elsevier, vol. 28(1), pages 57-66.
    19. Johnson, David R., 2002. "The effect of inflation targeting on the behavior of expected inflation: evidence from an 11 country panel," Journal of Monetary Economics, Elsevier, vol. 49(8), pages 1521-1538, November.
    20. Pesaran, H. Hashem & Shin, Yongcheol, 1998. "Generalized impulse response analysis in linear multivariate models," Economics Letters, Elsevier, vol. 58(1), pages 17-29, January.
    21. Nikolaos Antonakakis & Ioannis Chatziantoniou & David Gabauer, 2020. "Refined Measures of Dynamic Connectedness based on Time-Varying Parameter Vector Autoregressions," JRFM, MDPI, vol. 13(4), pages 1-23, April.
    22. Erdenebat Bataa & Denise R. Osborn & Marianne Sensier & Dick van Dijk, 2013. "Structural Breaks in the International Dynamics of Inflation," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 646-659, May.
    23. M. Ayhan Kose & Christopher Otrok & Charles H. Whiteman, 2003. "International Business Cycles: World, Region, and Country-Specific Factors," American Economic Review, American Economic Association, vol. 93(4), pages 1216-1239, September.
    24. David Y. Aharon & Zaghum Umar & Xuan Vinh Vo, 2021. "Dynamic spillovers between the term structure of interest rates, bitcoin, and safe-haven currencies," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-25, December.
    25. Neely, Christopher J. & Rapach, David E., 2011. "International comovements in inflation rates and country characteristics," Journal of International Money and Finance, Elsevier, vol. 30(7), pages 1471-1490.
    26. Khandokar Istiak & Aviral Kumar Tiwari & Humaira Husain & Kazi Sohag, 2021. "The Spillover of Inflation among the G7 Countries," JRFM, MDPI, vol. 14(8), pages 1-20, August.
    27. Haroon Mumtaz & Paolo Surico, 2012. "Evolving International Inflation Dynamics: World And Country-Specific Factors," Journal of the European Economic Association, European Economic Association, vol. 10(4), pages 716-734, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hamza, Taher & Ben Haj Hamida, Hayet & Mili, Mehdi & Sami, Mina, 2024. "High inflation during Russia–Ukraine war and financial market interaction: Evidence from C-Vine Copula and SETAR models," Research in International Business and Finance, Elsevier, vol. 70(PB).
    2. Aharon, David Y. & Azman Aziz, Mukhriz Izraf & Kallir, Ido, 2023. "Oil price shocks and inflation: A cross-national examination in the ASEAN5+3 countries," Resources Policy, Elsevier, vol. 82(C).
    3. Costin Radu Boldea & Bogdan Ion Boldea & Tiberiu Iancu, 2023. "The Pandemic Waves’ Impact on the Crude Oil Price and the Rise of Consumer Price Index: Case Study for Six European Countries," Sustainability, MDPI, vol. 15(8), pages 1-15, April.
    4. Liu, Fangying & Su, Chi Wei & Tao, Ran & Qin, Meng & Umar, Muhammad, 2024. "Fintech and aluminium: Strategic enablers of climate change mitigation and sustainable mineral policy," Resources Policy, Elsevier, vol. 91(C).
    5. Aharon, David Y. & Ali, Shoaib & Brahim, Mariem, 2024. "Connectedness at extremes between real estate tokens and real estate stocks," International Review of Financial Analysis, Elsevier, vol. 95(PB).
    6. Yang, Tianle & Dong, Qingyuan & Du, Min & Du, Qunyang, 2023. "Geopolitical risks, oil price shocks and inflation: Evidence from a TVP–SV–VAR approach," Energy Economics, Elsevier, vol. 127(PB).
    7. Dahlan Abdullah & Nurul Husna Zabidi & Dina Nurzafira Zulzamzuri & Ahmad Redhuan Abu Bakar & Siti Aisyah Tumin & Teku Zariff Zaeimoedin, 2024. "Unpacking the Inflation Basket: A Systematic Literature Review of Key Determinants of Rising Food Prices and their Global Impact," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(9), pages 706-713, September.
    8. Edoardo Beretta & Doris Neuberger, 2023. "Monetary aggregates in the US since 2020 and post-COVID-19 inflation: evidence from the equation of exchange," Economics and Business Letters, Oviedo University Press, vol. 12(4), pages 321-330.
    9. Shah, Sayar Ahmad & Garg, Bhavesh, 2023. "Identifying efficient policy mix under different targeting regimes: A tale of two crises," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 975-994.
    10. Al-Nassar, Nassar S. & Assaf, Rima & Chaibi, Anis & Makram, Beljid, 2024. "The nexus between mineral, renewable commodities, and regional stock sectors during health and military crises," Resources Policy, Elsevier, vol. 96(C).
    11. Philippe Goulet Coulombe & Karin Klieber & Christophe Barrette & Maximilian Goebel, 2024. "Maximally Forward-Looking Core Inflation," Papers 2404.05209, arXiv.org.
    12. Aharon, David Y. & Aziz, Mukhriz Izraf Azman & Nor, Safwan Mohd, 2023. "Cross-country study of the linkages between COVID-19, oil prices, and inflation in the G7 countries," Finance Research Letters, Elsevier, vol. 57(C).
    13. Nassar S. Al-Nassar & Abdulrahman A. Albahouth, 2023. "Inflation Spillovers among Advanced and Emerging Economies: Evidence from the G20 Group," Economies, MDPI, vol. 11(4), pages 1-25, April.
    14. Elie Bouri & David Gabauer & Rangan Gupta & Harald Kinateder, 2023. "Geopolitical Risk and Inflation Spillovers across European and North American Economies," Working Papers 202304, University of Pretoria, Department of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Stenfors, Alexis & Chatziantoniou, Ioannis & Gabauer, David, 2022. "Independent policy, dependent outcomes: A game of cross-country dominoes across European yield curves," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 81(C).
    2. Balcilar, Mehmet & Gabauer, David & Umar, Zaghum, 2021. "Crude Oil futures contracts and commodity markets: New evidence from a TVP-VAR extended joint connectedness approach," Resources Policy, Elsevier, vol. 73(C).
    3. Gabauer, David & Chatziantoniou, Ioannis & Stenfors, Alexis, 2023. "Model-free connectedness measures," Finance Research Letters, Elsevier, vol. 54(C).
    4. Jiang, Yanhui & Qu, Bo & Hong, Yun & Xiao, Xiyue, 2024. "Dynamic connectedness of inflation around the world: A time-varying approach from G7 and E7 countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 95(C), pages 111-125.
    5. Juncal Cunado & David Gabauer & Rangan Gupta & Chien-Chiang Lee, 2022. "On the Propagation Mechanism of International Real Interest Rate Spillovers: Evidence from More than 200 Years of Data," Working Papers 202212, University of Pretoria, Department of Economics.
    6. Naeem, Muhammad Abubakr & Chatziantoniou, Ioannis & Gabauer, David & Karim, Sitara, 2024. "Measuring the G20 stock market return transmission mechanism: Evidence from the R2 connectedness approach," International Review of Financial Analysis, Elsevier, vol. 91(C).
    7. Chatziantoniou, Ioannis & Gabauer, David & Gupta, Rangan, 2023. "Integration and risk transmission in the market for crude oil: New evidence from a time-varying parameter frequency connectedness approach," Resources Policy, Elsevier, vol. 84(C).
    8. Tiwari, Aviral Kumar & Aikins Abakah, Emmanuel Joel & Gabauer, David & Dwumfour, Richard Adjei, 2022. "Dynamic spillover effects among green bond, renewable energy stocks and carbon markets during COVID-19 pandemic: Implications for hedging and investments strategies," Global Finance Journal, Elsevier, vol. 51(C).
    9. Chatziantoniou, Ioannis & Gabauer, David & Perez de Gracia, Fernando, 2022. "Tail risk connectedness in the refined petroleum market: A first look at the impact of the COVID-19 pandemic," Energy Economics, Elsevier, vol. 111(C).
    10. Keagile Lesame & Elie Bouri & David Gabauer & Rangan Gupta, 2021. "On the Dynamics of International Real Estate Investment Trust Propagation Mechanisms: Evidence from Time-Varying Return and Volatility Connectedness Measures," Working Papers 202152, University of Pretoria, Department of Economics.
    11. Chatziantoniou, Ioannis & Elsayed, Ahmed H. & Gabauer, David & Gozgor, Giray, 2023. "Oil price shocks and exchange rate dynamics: Evidence from decomposed and partial connectedness measures for oil importing and exporting economies," Energy Economics, Elsevier, vol. 120(C).
    12. Iqbal, Najaf & Umar, Zaghum & Ruman, Asif M. & Jiang, Shaohua, 2024. "The term structure of yield curve and connectedness among ESG investments," Research in International Business and Finance, Elsevier, vol. 67(PA).
    13. Shi, Huai-Long & Zhou, Wei-Xing, 2022. "Factor volatility spillover and its implications on factor premia," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 80(C).
    14. Juncal Cunado & David Gabauer & Rangan Gupta, 2024. "Realized volatility spillovers between energy and metal markets: a time-varying connectedness approach," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 10(1), pages 1-17, December.
    15. Muneer Shaik & Mohd Ziaur Rehman, 2023. "The Dynamic Volatility Connectedness of Major Environmental, Social, and Governance (ESG) Stock Indices: Evidence Based on DCC-GARCH Model," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 30(1), pages 231-246, March.
    16. Nikolaos Antonakakis & Ioannis Chatziantoniou & David Gabauer, 2020. "Refined Measures of Dynamic Connectedness based on Time-Varying Parameter Vector Autoregressions," JRFM, MDPI, vol. 13(4), pages 1-23, April.
    17. Chatziantoniou, Ioannis & Gabauer, David & Stenfors, Alexis, 2020. "From CIP-deviations to a market for risk premia: A dynamic investigation of cross-currency basis swaps," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 69(C).
    18. Zaghum Umar & Oluwasegun Babatunde Adekoya & Mariya Gubareva & Sabri Boubaker, 2024. "Returns and volatility connectedness among the Eurozone equity markets," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(3), pages 3103-3122, July.
    19. Abakah, Emmanuel Joel Aikins & Brahim, Mariem & Carlotti, Jean-Etienne & Tiwari, Aviral Kumar & Mensi, Walid, 2024. "Extreme downside risk connectedness and portfolio hedging among the G10 currencies," International Economics, Elsevier, vol. 178(C).
    20. Aharon, David Y. & Kizys, Renatas & Umar, Zaghum & Zaremba, Adam, 2023. "Did David win a battle or the war against Goliath? Dynamic return and volatility connectedness between the GameStop stock and the high short interest indices," Research in International Business and Finance, Elsevier, vol. 64(C).

    More about this item

    Keywords

    Inflation; Prices; Connectedness; TVP-VAR; COVID-19; Russia-Ukraine conflict;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:50:y:2022:i:c:s1544612322004901. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.