40 wp791 has globalization changed the inflation

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40 WP791 Has globalization changed the inflation process? Gap between Actual and Predicted Inflation, with and without Global Variables Figure 5a 1 Median value of the squared deviation between actual and predicted inflation each quarter when equation (1) is estimated with 8-year rolling regressions and different control variables. “Domestic Only” is when the model only includes controls for inflation expectations, lagged inflation, and the domestic output gap. “Full Model” is the full set of variables listed in equation (1). Gap between Actual and Predicted Inflation, with Different Control Variables Figure 5b 1 Reports median of squared deviations of the difference between actual and predicted inflation each quarter when equation (1) is estimated with 8-year rolling regressions and different control variables. “Domestic variables” only includes controls for inflation expectations, lagged inflation, and the domestic output gap. “Domestic variables plus oil” also includes world oil prices. “Global and domestic variables” is the full set of variables. See Section IV. C for more details and Appendix A for variable definitions. Domestic Variables Domestic Variables & Oil Global & Domestic Variables Domestic Variables Domestic Variables & Oil Global & Domestic Variables Full Period 0.52 0.48 0.26 0.05 0.05 0.03 1997-06 0.28 0.28 0.13 0.05 0.05 0.03 2007-17 0.71 0.64 0.36 0.05 0.04 0.03 1997-02 0.25 0.26 0.13 0.04 0.04 0.02 2003-07 0.50 0.49 0.24 0.05 0.06 0.04 2008-09 1.19 0.96 0.44 0.05 0.04 0.02 2012-14 0.62 0.50 0.35 0.05 0.04 0.03 2015-17 0.56 0.54 0.27 0.05 0.04 0.03 Core CPI Inflation CPI Inflation
WP791 Has globalization changed the inflation process? 41 Phillips Curve Estimates – Sensitivity Analysis Figure 6 1 Left side of table reports sensitivity tests for column (3) in Figure 3, and right side for column (4) in Figure 3. Column (1) on each side reports base case. Column (2) uses the OECD output gap instead of the principal component of a larger set of measures. Column (3) only includes the last decade (2008-17). Column (4) includes the full period starting in 1993, but excludes the global financial crisis and euro crisis periods (ie, from 2008-2014). Column (5) only includes the last 5 years (2013-2017) as the “post” period. Column (6) excludes emerging markets and column (7) only includes advanced economies outside the euro area. Regressions of quarterly, annualized CPI or core inflation using random effects with robust standard errors clustered by country. See notes to Figure 3 for more details. The χ2 test statistics reported at the bottom are: a test if the five global variables changed significantly in the “post” period (if the coefficients on their interactions are jointly significantly different than zero); and if the global variables in the both periods are significantly different than zero. The ***, **, * are significant at the 1%, 5% and 10% levels, respectively. Output Gap Only Drop Crises "Post" is Exclude Non-Euro Output Gap Only Drop Crises "Post" is Exclude Non-Euro Base (not PC) 2008-17 (2008-14) 2013-17 EMs AEs only Base instead of PC 2008-17 (2008-14) 2013-17 EMs AEs only (1) (2) (3) (4) (5) (6) (7) (1) (2) (3) (4) (5) (6) (7) Inflation Expect. 0.592*** 0.585*** 0.711*** 0.579*** 0.656*** 0.653*** 0.786*** 0.416*** 0.413*** 0.576*** 0.414*** 0.468*** 0.438*** 0.444*** Lagged Inflation 0.682*** 0.679*** 0.568*** 0.684*** 0.651*** 0.537*** 0.453*** 0.750*** 0.748*** 0.570*** 0.751*** 0.712*** 0.705*** 0.619*** Domestic Out. Gap 0.115*** 0.121*** 0.065** 0.114*** 0.097*** 0.146*** 0.163*** 0.116*** 0.123*** 0.038 0.115*** 0.094*** 0.122*** 0.140***

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