Abstract
We study how domestic and global output gaps affect CPI inflation. We use a New-Keynesian Phillips curve framework which controls for nonlinear exchange rate movements for a panel of 26 advanced and 22 emerging economies covering the 1994Q1-2017Q4 period. We find broadly that both global and domestic output gaps are significant drivers of inflation both in the pre-crisis (1994-2008) and post-crisis (2008-2017) periods. Furthermore, after the crisis, in advanced economies the effect of the domestic output gap declines, while in emerging economies the effect of the global output gap declines. The paper demonstrates the usefulness of the New Keynesian Phillips curve in identifying the impact of global and domestic output gaps on inflation.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
