International Inflation Spillovers through Input Linkages

We document that international input-output linkages contribute substantially to synchronizing producer price inflation (PPI) across countries. Using a multicountry, industry-level data set that combines information on PPI and exchange rates with global input-output linkages, we recover the underlyi...

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Bibliographic Details
Published inThe review of economics and statistics Vol. 101; no. 3; pp. 507 - 521
Main Authors Auer, Raphael A., Levchenko, Andrei A., Sauré, Philip
Format Journal Article
LanguageEnglish
Published One Rogers Street, Cambridge, MA 02142-1209, USA MIT Press 01.07.2019
MIT Press Journals, The
Subjects
Economic models
Foreign exchange rates
Inflation
Pricing policies
Spillover effect
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Summary:We document that international input-output linkages contribute substantially to synchronizing producer price inflation (PPI) across countries. Using a multicountry, industry-level data set that combines information on PPI and exchange rates with global input-output linkages, we recover the underlying cost shocks that are propagated internationally via the global input-output network, thus generating the observed dynamics of PPI. We then compare the extent to which common global factors account for the variation in actual PPI and in the underlying cost shocks. Across a range of econometric tests, input-output linkages account for half of the global component of PPI inflation.
Bibliography:July, 2019
ISSN:0034-6535
1530-9142
DOI:10.1162/rest_a_00781