| By: |
Eickmeier, Sandra;
Kühnlenz, Markus |
| Abstract: |
We apply a structural dynamic factor model to a large quarterly dataset
covering 38 countries between 2002 and 2011 to analyze China's role in global
inflation dynamics. We identify Chinese supply and demand shocks and examine
their contributions to global price dynamics and the transmission mechanism.
Our main findings are: (i) Chinese supply and demand shocks affect prices in
other countries significantly. Demand shocks matter slightly more than supply
shocks. Producer prices tend to be more strongly affected than consumer prices
by Chinese shocks. The overall share of international inflation explained by
Chinese shocks is notable (about 5 percent on average over all countries but
not more than 13 percent in each region); (ii) Direct channels (via import and
export prices) and indirect channels (via greater exposure to foreign
competition and commodity prices) seem both to matter; (iii) Differences in
trade (overall and with China) and in commodity exposure help explaining
crosscountry differences in price responses. -- |
| Keywords: |
global inflation,China,international business cycles,structural dynamic factor model,sign restrictions |
| JEL: |
F41 E31 C3 |
| Date: |
2013 |
| URL: |
http://d.repec.org/n?u=RePEc:zbw:bubdps:072013&r=cna |