Time-varying sources of fluctuations in global inflation

• Published in: Economic modelling 2025-02, Vol.143, p.106970, Article 106970
• Main Authors: Kim, Won Joong, Ko, Juyoung, Kwon, Won Soon, Piao, Chunyan
• Format: Article
• Language: English
• Subjects: COVID-19; EMU; Global inflation; Russia–Ukraine war; Time-varying structural vector autoregression
• ISSN: 0264-9993
• DOI: 10.1016/j.econmod.2024.106970

Different crises, such as the GFC, COVID-19 pandemic, and RU-UA war, lead to the common economic consequences: fluctuations in global inflation. In a globalized world, global inflation matters because it also affects the national economy. Although the literature provides determinants of inflation at national and regional levels, no studies have measured global inflation and analyzed its sources of fluctuations during the GFC, COVID-19, and RU-UA war periods. To fill this void, we measure monthly global inflation and estimate its dynamics using a time-varying parameter structural vector autoregression model with stochastic volatility. The results from global data show that global inflation during crisis periods is greatly affected by the monetary and the oil price shocks. Finally, the application to the EMU member countries implies that high EMU inflation rates in recent years were dominantly caused by excessive expansionary monetary policy in the EMU system. •We estimate the time-varying effects of macroeconomic shocks on global inflation, focusing on the GFC, Covid-19, and RU-UA war periods.•Oil price and global supply chain shocks increase global inflation over all periods.•Real interest rate shocks have negative effects on inflation, implying that monetary easing policy can lead to a higher inflation.•Global inflation is greatly affected by the monetary and the oil price shocks.•Recent high EMU inflation is dominantly caused by excessive expansionary monetary policy.