Structural breaks in the international dynamics of inflation

E Bataa, DR Osborn, M Sensier, Dick van Dijk

Research output: Contribution to journalArticleAcademicpeer-review

19 Citations (Scopus)

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.
Original languageEnglish
Pages (from-to)646-659
Number of pages14
JournalThe Review of Economics and Statistics
Volume95
Issue number2
DOIs
Publication statusPublished - 2013

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