Global Factors Driving Inflation and Monetary Policy: A Global VAR Assessment

Martin Feldkircher, Elizaveta Lukmanova, Gabriele Tondl

Publication: Working/Discussion PaperWU Working Paper

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Abstract

In this paper, we examine international linkages in inflation and short-term interest rates using a global sample of OECD and emerging economies. Using a Bayesian global vector autoregression (GVAR) model, we show that for short-term interest rates both movements in inflation and output play an important role. In advanced countries, however, international factors such as foreign interest rates appear as an important driver of local interest rates. For inflation, we also find evidence for the importance of global factors, such as price developments in other countries, oil prices and the exchange rate. Again, this impact of global factors appears predominately in advanced countries.
Original languageEnglish
Place of PublicationVienna
PublisherWU Vienna University of Economics and Business
Number of pages37
DOIs
Publication statusPublished - 1 Aug 2019

Publication series

SeriesDepartment of Economics Working Paper Series
Number289

WU Working Paper Series

  • Department of Economics Working Paper Series

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