BIS国际清算银行-Have-the-driving-forces-of-inflation-changed-in-advanced-and-emerging-market-economies_33页_1mb

Summary of "Have the driving forces of inflation changed in advanced and emerging market economies?"

Core Content

This paper investigates whether the driving forces of inflation have changed in 47 advanced and emerging market economies from 1996 to 2018, with a particular focus on the impact of the Great Financial Crisis (GFC). Using an open economy hybrid Phillips curve model, the authors analyze the role of inflation expectations, output gaps (domestic and foreign), exchange rate pass-through, and oil prices in determining inflation behavior.

Main Viewpoints

• Inflation Stability Post-GFC: Inflation has remained relatively stable in many economies after the GFC, even though this period was marked by large negative output gaps globally.
• Phillips Curve Behavior: The slope of the Phillips curve has been a topic of debate. Some studies suggest it has flattened, while others indicate it remains stable.
• Inflation Expectations: A notable change is the increased weight on expected future inflation, particularly in the context of professional forecasts, across both advanced and emerging market economies.
• Global Factors: There is evidence that global economic forces, such as output gaps and oil prices, have become more important in determining inflation, especially for emerging market economies.
• Structural Breaks: The authors test for structural breaks in the model parameters and find that, for most economies, there has been relatively little significant change in the underlying drivers of inflation.

Key Information

Data and Methodology

• A balanced panel dataset is constructed for 47 economies, including quarterly data on inflation, inflation expectations, real GDP, exchange rates, and oil prices.

• The dataset includes:

  • Headline CPI for inflation.
  • Professional forecasts for expected future inflation.
  • Domestic output gap based on the HP filter applied to log real GDP.
  • Foreign output gap calculated as a weighted average of trading partners' output gaps using trade weights.
  • Nominal effective exchange rate index and WTI oil price index.

• The foreign output gap for economy $i$ is defined as:
  $$
  \tilde{y}{it}^* = \sum{j=1}^{10} \omega_{jt}^i \tilde{y}{jt}
  $$
  where $\omega{jt}^i$ is the trade weight between economy $i$ and $j$.

• Expected future inflation is measured using one-year-ahead survey forecasts from professional forecasters, adjusted to a 12-month fixed horizon.

Model Specification

• The authors estimate the following open economy hybrid Phillips curve model:
  $$
  \pi_{it} = \beta_{0i} + \beta_{1i} \pi_{it - 1} + \beta_{2i} E_t^s[\pi_{it + 4}] + \beta_{3i} \tilde{y}{it} + \beta{4i} \tilde{y}{it}^* + \beta{5i} \Delta_4 e_{it} + \beta_{6i} \Delta_4 p_{t - 1}^{oil} + \varepsilon_{it}
  $$
  where:

  • $\pi_{it}$ is year-on-year inflation.
  • $E_t^s[\pi_{it + 4}]$ is expected future inflation.
  • $\tilde{y}_{it}$ is the domestic output gap.
  • $\tilde{y}_{it}^*$ is the foreign output gap.
  • $\Delta_4 e_{it}$ is the exchange rate pass-through.
  • $\Delta_4 p_{t - 1}^{oil}$ is the lagged oil price change.
  • $\varepsilon_{it}$ is a residual inflation shock.

• A restricted version of the model is also considered, where $\beta_{1i} + \beta_{2i} = 1$, allowing for a direct interpretation of the weights on backward-looking and forward-looking inflation expectations.

Empirical Results

• The average weight on expected future inflation has increased for both advanced and emerging market economies.
• Inflation expectations have a heterogeneous but significant effect on inflation, with emerging market economies showing higher sensitivity to external factors.
• Domestic and foreign output gaps have a positive but weak effect on inflation.
• Exchange rate pass-through and oil prices have also shown significant but heterogeneous effects.
• The Phillips curve has generally flattened over time, consistent with better-anchored inflation expectations.
• Structural break tests indicate that while most parameters have remained stable, the role of forward-looking expectations has increased, particularly after the GFC.

Robustness and Interpretation

• The results are robust to alternative methods of estimating the output gap, including the BN filter with dynamic demeaning.
• The GFC has had a notable impact on the model parameters, particularly on the role of forward-looking inflation expectations.
• The behavior of inflation drivers, especially more anchored inflation expectations, helps explain the observed patterns in inflation levels and volatility across economies.

Conclusion

The paper finds that the driving forces of inflation have not undergone significant changes in most economies over the sample period, except for an increase in the weight on expected future inflation. Emerging market economies are more sensitive to external factors, and the flattening of the Phillips curve appears to be linked to better-anchored inflation expectations. The results support the idea that global economic forces play a growing role in inflation dynamics, particularly in the context of the GFC and the ongoing integration of global markets.