Is Digitalization Driving Domestic Inflation?

Author/Editor:

Balazs Csonto ; Yuxuan Huang ; Camilo E Tovar Mora

Publication Date:

December 6, 2019

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

This paper examines the extent to which digitalization—measured by a new proxy based on IP addresses allocations per country—has influenced inflation dynamics in a sample of 36 advanced and emerging economies over 2000-2017. Phillips curve estimates show that digitalization has a statistically significant negative effect on inflation in the short run. Its economic impact is not large but has increased since 2012 and mainly operates through a cost/competition channel. Principal components and cointegration analysis further suggest digitalization is a key driver of lower trend inflation.

Series:

Working Paper No. 19/271

Subject:

English

Publication Date:

December 6, 2019

ISBN/ISSN:

9781513519944/1018-5941

Stock No:

WPIEA2019271

Format:

Paper

Pages:

45

Please address any questions about this title to publications@imf.org