The Review of Economics and Statistics Vol. 95 No. 2 2013
Structural Breaks in the International Dynamics of Inflation
Abstract
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.
- DOI
- 10.1162/rest_a_00261
- Volume
- 95
- Issue
- 2
- Pages
- 646-659
- Language
- en
- Sources
- openalex crossref