Structural Breaks in the International Dynamics of Inflation
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In: Review of Economics and Statistics, Vol. 95, No. 2, 01.05.2013, p. 646-659.
Research output: Contribution to journal › Article › peer-review
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TY - JOUR
T1 - Structural Breaks in the International Dynamics of Inflation
AU - Bataa, Erdenebat
AU - Osborn, Denise R
AU - Sensier, Marianne
AU - Van Dijk, Dick
PY - 2013/5/1
Y1 - 2013/5/1
N2 - This paper proposes an iterative procedure to discriminate between structural breaks in the coefficients and the disturbance covariance matrix of a system of equations, with recursive procedures then identifying individual coefficient shifts and separating volatility from correlation breaks. Structural breaks in short-term cross-country inflation relations are then examined for major G-7 economies and within the euro area. There is evidence that the euro area leads inflation in North America, while changing short-term interactions apply within the euro area. Covariability generally increases from the late 1990s, while euro-area countries move from essentially idiosyncratic contemporaneous variation to comovement in the 1980s.
AB - This paper proposes an iterative procedure to discriminate between structural breaks in the coefficients and the disturbance covariance matrix of a system of equations, with recursive procedures then identifying individual coefficient shifts and separating volatility from correlation breaks. Structural breaks in short-term cross-country inflation relations are then examined for major G-7 economies and within the euro area. There is evidence that the euro area leads inflation in North America, while changing short-term interactions apply within the euro area. Covariability generally increases from the late 1990s, while euro-area countries move from essentially idiosyncratic contemporaneous variation to comovement in the 1980s.
U2 - 10.1162/REST_a_00261
DO - 10.1162/REST_a_00261
M3 - Article
VL - 95
SP - 646
EP - 659
JO - Review of Economics and Statistics
JF - Review of Economics and Statistics
SN - 0034-6535
IS - 2
ER -