How Local is the Local Inflation Factor? Evidence from Emerging European Countries

Oguzhan Cepni*, Michael P. Clements

*Corresponding author for this work

Research output: Working paperResearchpeer-review

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We consider whether inflation is a ‘global phenomenon’ for European emerging market economies, as has been claimed for advanced or high-income countries. We find that a global inflation factor accounts for more than a half of the variance in the national inflation rates, and show that forecasting models of national headline inflation rates that include global inflation factors generally produce more accurate path forecasts than Phillips Curve-type models, and models with local inflation factors. Our results are qualitatively unaffected by allowing for sparsity and non-linearity in the factor forecasting models.
Original languageEnglish
Place of PublicationFrederiksberg
PublisherCopenhagen Business School [wp]
Number of pages61
Publication statusPublished - 2021
SeriesWorking Paper / Department of Economics. Copenhagen Business School


  • Global inflation
  • Common factors
  • Variable selection

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