## Is Digitalization Driving Domestic Inflation?

_IMF Working Papers, December 6, 2019_

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**Canonical URL:** [Is Digitalization Driving Domestic Inflation?](https://www.imf.org/en/publications/wp/issues/2019/12/06/is-digitalization-driving-domestic-inflation-48786)

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## Bibliographic details
- Authors: Balazs Csonto, Yuxuan Huang, Camilo E Tovar Mora
- Published: December 6, 2019
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513519944.001

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### Key findings
- Study sample: 36 advanced and emerging economies over 2000-2017.
- Digitalization is measured by a new proxy based on IP addresses allocations per country.
- Phillips curve estimates show that digitalization has a statistically significant negative effect on inflation in the short run.
- The economic impact of digitalization on inflation is not large but has increased since 2012.
- The main transmission channel is through a cost/competition channel.
- Principal components and cointegration analysis further suggest digitalization is a key driver of lower trend inflation.

### Methodology and measurement
- New proxy: IP addresses allocations per country used to measure digitalization.
- Empirical approaches: Phillips curve estimation, principal components analysis, and cointegration analysis.
- Timeframe: 2000-2017.
- Sample: 36 advanced and emerging economies.

### Interpretation and implications
- Short-run dynamics: Digitalization reduces inflation pressures via cost reductions and increased competition, with statistically significant effects in Phillips curve specifications.
- Trend dynamics: Evidence from principal components and cointegration analysis indicates digitalization contributes to lower trend inflation.
- Temporal evolution: The inflation-reducing impact of digitalization has grown since 2012.

### Subjects and keywords (as stated in the source)
- Subjects: Digital economy, Digitalization, Economic sectors, Global value chains, Globalization, Inflation, Output gap, Prices, Production, Technology.
- Keywords: Digital economy, Digitalization, food inflation, Global, Global value chains, Inflation, inflation dynamics, inflation expectation, inflation gap, inflation trend, inflation variation, Internet, IP Address, Output gap, Phillips curve, trend inflation, WP.

*Is Digitalization Driving Domestic Inflation? By Balazs Csonto, Yuxuan Huang, Camilo E Tovar Mora; December 6, 2019.*

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- **Working Paper**
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_Source: https://www.imf.org/en/publications/wp/issues/2019/12/06/is-digitalization-driving-domestic-inflation-48786_