An international perspective on the recent behavior of inflation

Silvio Contessi, Pierangelo De Pace, Li Lily Li

Research output: Contribution to journalArticleResearchpeer-review

2 Citations (Scopus)


Several commentators have been concerned about the possibility that the euro area may be experiencing disinflation with the risk of deflation. However, the euro area is not the only economy navigating the risky waters of low inflation. Several other advanced economies have recently experienced below-target inflation as well as outright deflation. In this article, the authors collect data for nine advanced economies and document several facts about the behavior of inflation during the 2002-14 period. First, they show that the relationship between inflation rates and short-term rates displays similar changes across advanced economies - with and without central bank programs designed to increase the size of their balance sheets (e.g., large-scale asset purchases). Second, they describe recent indications that headline and core inflation are below target for individual countries. They then discuss various explanations for this trend (global factors, output gaps, and changes in inflation expectations), showing that there is some important heterogeneity across countries. Finally, they show that while output has become even more synchronized across countries since 2008, the cross-country correlation f inflation is no longer higher than the cross-country correlation of output.
Original languageEnglish
Pages (from-to)267-294
Number of pages28
JournalFederal Reserve Bank of St. Louis Review
Issue number3
Publication statusPublished - 2014
Externally publishedYes

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