Another Look at Global Disinflation
Bank for International Settlements, Monetary and Economic Department, 2009 - Deflation (Finance) - 31 pages
This paper highlights relative price adjustments taking place in the global economy as important sources of the lower levels of inflation rates observed in the recent decades. Using a markup model, it shows substantial effects from declines in wage costs and import prices relative to consumer prices. Out of the 5 percentage point decline in the inflation rates in eight OECD countries from 1970-1989 to 1990-2006, global shocks to two relative prices account for more than 1.5 percentage points, while a monetary policy shock accounts for another 1 percentage point.
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Australia Banerjee Batini Borio and Filardo calculated using regression central banks Coefﬁcients obtained coefﬁcients of equation cointegration columns of Tables common factor const Contributions are calculated disinflation Doornik dynamic factor model effects estimation of equation Estimation results ﬁrst global disinﬂation global economy global import price global relative price global shocks global wage markup globalisation GLS estimation identiﬁcation import price inﬂation import price markup industrial countries inﬂation expectations inﬂation process inﬂation rate inﬂuenced International Settlements Japan Keynesian Phillips curve Koske and Sollie labour shares marginal cost markup model monetary policy shock NKPC notes for Table null hypothesis OECD oil supply shocks panel data percentage point decline price inﬂation Ap regression coefﬁcients relative price adjustments relative price shocks root tests sample countries sample period Sekine speciﬁcations Static long-run coefficients statistically signiﬁcant Sweden unit root United Kingdom variables wage costs wage markup shock Washington D.C.