Working Paper: CEPR ID: DP15914
Authors: Stefan Gerlach; Rebecca Stuart
Abstract: We study co-movements of inflation in a group of 15 countries before and during the classical Gold Standard by fitting a generalisation of the Ciccarelli-Mojon (2010) model on annual data spanning 1851-1913. We find that international inflation functions as an “attractor” for domestic inflation rates. The cross-sectional dispersion of inflation declined gradually over the sample and Bai-Perron tests for structural breaks at unknown points in time suggest that there are breaks in six of reduced-form inflation equations. However, sub-sample estimates indicate that the overall finding that international inflation is an important influence on domestic inflation.
Keywords: international inflation; gold standard; principal components; factor analysis
JEL Codes: E31; F40; N10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| international inflation (F31) | domestic inflation rates (E31) |
| international inflation (F31) | domestic inflation rates (Switzerland) (E31) |
| international inflation (F31) | domestic inflation rates (US) (E31) |
| international inflation (F31) | domestic inflation rates (France) (E31) |
| structural breaks (L16) | domestic inflation rates (E31) |
| cross-sectional dispersion of inflation rates (E31) | domestic inflation rates (E31) |