We document that international input-output linkages contribute substantially to synchronizing producer price inflation (PPI) across countries. Using a multicountry, industry-level data set that combines information on PPI and exchange rates with global input-output linkages, we recover the underlying cost shocks that are propagated internationally via the global input-output network, thus generating the observed dynamics of PPI. We then compare the extent to which common global factors account for the variation in actual PPI and in the underlying cost shocks. Across a range of econometric tests, input-output linkages account for half of the global component of PPI inflation.
© 2019 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology
The President and Fellows of Harvard College and the Massachusetts Institute of Technology
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