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A time-varying Phillips curve with global factors: Are global factors important?

Kabundi, Alain, Poon, Aubrey, Wu, Ping (2023) A time-varying Phillips curve with global factors: Are global factors important? Economic Modelling, 126 . Article Number 106423. ISSN 0264-9993. (doi:10.1016/j.econmod.2023.106423) (KAR id:103838)

Abstract

Increased globalization and trade have integrated the world, but whether they are the underlying drivers of the flattening of the Phillips curve slope is not clear. This problem is further complicated since time-varying parameters are empirically important in most applications as the role of global factors may change over time. This paper investigates empirically the role played by global and domestic factors in driving dynamics in inflation using a panel data comprising of 23 advanced (AEs) and 11 emerging market economies (EMEs), from 1995Q1 to 2018Q1. The results indicate the predominance and increasing importance of global factors in explaining inflation dynamics, especially for EMEs. The Phillips curve is flat for both groups, but it is flatter in AEs. The results are consistent with the theoretical view that increased globalization and trade are underlying factors behind the flattening of the Phillips curve.

Item Type: Article
DOI/Identification number: 10.1016/j.econmod.2023.106423
Subjects: H Social Sciences
Divisions: Divisions > Division of Human and Social Sciences > School of Economics
Funders: Örebro University (https://ror.org/05kytsw45)
Depositing User: Aubrey Poon
Date Deposited: 09 Nov 2023 12:14 UTC
Last Modified: 11 Jan 2024 11:02 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/103838 (The current URI for this page, for reference purposes)

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