Abstract
The purpose of this paper is to examine whether the phenomenon of global inflation is observable at disaggregated level by measuring the comovements in disaggregated sectoral inflation. The co-movements in disaggregate sectoral inflation are modelled as being associated with a global factor, a sector specific factor and an idiosyncratic error term. A dynamic factor model is estimated using the sectoral inflation of fifteen sectors in 15 OECD countries. The sector specific sectors are important and phenomenon of global inflation is more evident at disaggregate level. The co- movements of inflation of tradable sectors are found to be substantially greater than the co-movements in non-tradable sector which implies that the greater co-movements of inflation can be attributed to increased trade and global integration of product markets. The main contribution of the study is that it provides empirical evidence for the argument built in paper that global shocks affect the prices in different sectors with different intensity. Tradable sectors are more open to international trade, hence the variance of sectoral inflation explained by sector specific factor is observed higher in these sectors than non-tradable sectors
Kaneez Fatima,, Jameel Ahmed. (2020) Globalisation and Inflation: Evidence from Disaggregated Inflation Data, Balochistan Review, Volume 1, Issue 1.
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