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 - https://doi.org/10.1162/REST_a_00261

DO - https://doi.org/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 -