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The international dimension of trend inflation

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  • Ascari, Guido
  • Fosso, Luca

Abstract

A trend-cycle BVAR decomposition investigates the role of different slow-moving trends – i.e., globalization, expectations, automation, labor demand and supply – in shaping the slow-moving dynamics of trend inflation. Despite well-anchored expectations, slow-moving imported “cost-push” factors induced disinflationary pressure keeping trend inflation below target. The cycle block provides evidence of inflation volatility increasingly driven by international factors. These results can explain why, from 2000 in the U.S. and before the recent surge, inflation remained both below target and silent to domestic slack.

Suggested Citation

  • Ascari, Guido & Fosso, Luca, 2024. "The international dimension of trend inflation," Journal of International Economics, Elsevier, vol. 148(C).
    • Handle: RePEc:eee:inecon:v:148:y:2024:i:c:s0022199624000205
    DOI: 10.1016/j.jinteco.2024.103896
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    2. Auer, Raphael & Pedemonte, Mathieu & Schoenle, Raphael, 2024. "Sixty Years of Global Inflation: A Post-GFC Update," CEPR Discussion Papers 19226, C.E.P.R. Discussion Papers.

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    More about this item

    Keywords

    Trend-cycle decomposition; Trend inflation; Global inflation; Phillips curve;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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