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Inflation Dynamics in Asia: Causes, Changes, and Spillovers from China
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Author/Editor: |
Osorio, Carolina | Unsal, D. Filiz |
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November 1, 2011 |
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Electronic Access: |
Free Full Text (PDF file size is 1,423KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.
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Summary: The perception that Asia’s inflation dynamics is driven by idiosyncratic supply shocks implies, as a corollary, that there is little scope for a policy reaction to a build-up of inflationary pressures. However, Asia’s fast growth and integration over the last two decades suggest that the drivers of inflation may have changed, and that domestic demand pressures may now play a larger role than in the past. This paper presents a quantitative analysis of inflation dynamics in Asia using a Global VAR (GVAR) model, which explicitly incorporates the role of regional and global spillovers in driving Asia’s inflation. Our results suggest that over the past two decades the main drivers of inflation in Asia have been monetary and supply shocks, but also that, in recent years, the contribution of these shocks has fallen, whereas demand-side pressures have started to emerge as an important contributor to inflation in Asia.
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Order a print copy
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Series: |
Working Paper No. 11/257 |
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Subject(s): |
Asia | China | Commodity prices | Cross country analysis | Demand | Economic models | Inflation | Spillovers |
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Author's keyword(s): |
Inflation | Global VAR (GVAR) | Monetary Policy |
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Published: |
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November 1, 2011 |
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Format: |
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Paper |
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Stock No: |
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WPIEA2011257 |
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Pages: |
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20 |
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Price: |
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US$18.00 (Academic Rate: US$18.00 )
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