Inflation of tradable goods

Abstract

This article explores which large economy blocks determine foreign inflation around the world. In the analysis, we focus on importable goods of 15 countries ranging from 1992 to 2003 at monthly basis. Using a SUR estimation, we find the US driving the inflation of importable goods around the world. However, decomposing the variation of importable good price indexes by frequency, by means of the Baxter–King approximate band pass filter, we find that the Asian area might be a source of considerable inflation on the short-run.

Notes

¹ Concerning inflation of commodity prices, see Jin and Frechette ((2004)) and Katsimi ((2004)).

² It is a measure of the substitution effect in the excess demand function.

³ An example of another application of the SUR methodology can be found on Kim (2004).

⁴ The notation indicates that the filter passes through components of the data with cycles higher than 24 months while the construction of the filter uses 4 leads and lags of the data.