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Research Working Paper |
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By Craig S. Hakkio Abstract
This paper examines the dynamics of various measures of national,
regional, and global inflation. The paper calculates the first two
common factors for four measures of industrial country inflation rates:
total CPI, core CPI, cyclical total CPI, and cyclical core CPI. The
paper then demonstrates that the first common factor is sometimes
helpful in forecasting national inflation rates. It also shows that the
second common factor and the first common factor for cyclical inflation
is sometimes helpful in forecasting national CPI inflation rates.
Finally, the paper suggests that the commonality of industrial inflation
rates reflects the commonality of the determinants of inflation. |