新经济思想研究所-超越国界的通货膨胀：一项研究议程

InflationBeyondBorders:AResearchAgenda

CarloD’Ippoliti*,DanieleTori†,andLucioGobbi‡

WorkingPaperNo.255

September11th,2026

ABSTRACT

Prevailingtheoriesexplaininflationasadomesticprocessdisturbedbyexogenousshocks,anassumptionthatstrugglestoaccountforthestrongcross-countrysynchronizationofinflationvisiblebothduringtheGreatModerationandinthepost-2021surge.Wechallengethismethodologicalnationalismandarguethatdomesticpricedynamicsareconstrainedorenabledbytheinternationalenvironment,throughthedistributionofpower,monetaryandfinancialinstitutions,andtheinteractionamongeconomies.Wedistinguishourpositionfromthe“globe-centric”literature(BorioandFilardo,2007;Aueretal.,2017):ratherthanrescalingaclosed-economyPhillipscurvetoasingleworldeconomy,wetreatinflationasemergingfromtheinteractionamongdistinctbutopeneconomies.Weshowthatthethreecanonicalframeworks(monetarist,real-market,andconflict)remainanalyticallyusefuloncerecastattheinternationallevel,butimplyverydifferentcause-effectrelations.Weillustratethreecandidatemechanisms:theerosionoflabor’sbargainingpower,theasymmetricadjustmentoftheinternationalmonetarysystem,andfinancializationandgloballiquidity,withareviewofthe

*SapienzaUniversitàdiRomaandCentroInterdisciplinareLinceoGiovani,

carlo.dippoliti@uniroma1.it

†UniversityofPisaandTheOpenUniversityBusinessSchool(UK),

daniele.tori@unipi.it

‡UniversityofTrento,

lucio.gobbi@unitn.it

CarloD’IppolitigratefullyacknowledgesthefinancialsupportofSapienzaUniversity,grant

#RM123188E1CBAFBA.TheauthorswishtothankThomasFerguson,theparticipantstotheSTOREP2025annualconferenceinTermoli,the6thInternationalWorkshoponDemand-ledgrowthinRiodeJaneiro,the2025

InternationalConferenceonEconomicTheoryandPolicyinTokyo,andtheseminarparticipantsatMeiji

University.Allremainingerrorsareours.DuringthepreparationofthisworktheauthorsusedClaudeandChatGPTtoimprovethereadabilityandlanguageofthemanuscriptandtodouble-checkthestatisticalanalysesandcode.

Afterusingthesetools,theauthorsreviewedandeditedthecontentasneededandtakefullresponsibilityforthecontentofthepublishedarticle.

literatureanddescriptiveevidence.Wemakenoclaimtocausalidentification;thepapersetsoutaresearchagendaandasetoffalsifiablehypothesesforfuturework.

/10.36687/inetwp255

JELcodes:E3;F3;P5

Keywords:inflation,internationaleconomy,financialization,globalization

1.Introductionandmotivation

Betweenthe1990sandthe2020s,inflationceasedtobeacentralconcerninadvancedeconomiesandeveninmanylow-andmiddle-incomecountries.FollowingtheGlobalFinancialCrisis(GFC),policyinterestrateswereheldcloseto(sometimesbelow)zeroacrosshigh-incomeeconomies,yetinflationfrequentlyundershotcentralbanktargets.Then,withtheCovid-19crisisandthewarinUkraine,inflationspikedglobally,reignitingpoliticalandacademicdebates.Thesedebates,byandlarge,overlookthatboththelongperiodof“greatmoderation”(orsecularstagnation)andthesuddenpost-Covidinflationarysurgedisplayremarkablecross-countrycorrelation.

Conventionaleconomictheoriesassignthetaskofcontrollinginflationtonationalmonetaryauthorities,whileintheorycentralbankstreattheinternationalenvironmentasanexogenousconstraint.Althoughanimportantandgrowingliteraturerecognizesglobalfactors,thesearegenerallyincorporatedascommonshocksorasfeaturesofanenlargedglobaleconomyratherthanasinteractionsamongdistincteconomies.Arelativelylimitedliteraturedoesconsiderthecross-borderspreadofinflation(Altansukhetal.,2017)butframesitastheresultofunexpectedshockssimultaneouslyaffectingseveralcountriesorof“contagion”.Suchapproachesremainlargelycompatiblewithmainstreamframeworksthatconceptualizeinflationasaperturbationofequilibrium,typicallydemand-pullinnature,andgroundedinanexplicitorimplicittheoryofexogenousmoney.Globalshocks,suchasthepandemicorenergypricespikes,areindeedplausiblecausesofinflationspikes.Whileclearlyimportant,theydonotbythemselvesseemsufficienttoexplainthesustainedcross-countrysynchronizationofinflationobservedwellbeforetheCovid-19pandemicandRussia'sinvasionofUkraine.Thissuggeststhatexplanationsrelyingexclusivelyonexogenousshocksleaveanimportantpartofthepre-pandemicsynchronizationunexplained.TheviewthatinflationismostlydrivenbydomesticfactorsandoccasionallyglobalshocksisaconsequenceofestablishedtheoreticalparadigmsandmaypartlyreflecttheacademiccentralityoftheUSA:alargeeconomylessexposedtoforeignshocksthanmostothercountries,andwiththeuniquefeatureofitscurrencybeingtheprimeworldreserveasset,whichamongotherthingsimpliesthatalargeshareofitsimportsareinvoicedinitsowncurrency.Forallothercountries,inflationismoreobviouslyrelatedtotheinternationalenvironment,atleastbecause‘importedinflation’maybecausedbyexchangeratemovementsthataffectthepriceofimports.

Butthereismoretointernationalinflationthansimplyhigherpricesofimports.Indeed,therecentexperienceechoesthe1970s,wheninflationspikedinternationallyforcausesthatarestilltheobjectofdebate(theoilpriceshocks,Keynesianpolicies,de-anchoringofexpectations,etc.).Then,astheBrettonWoodssystemcollapsed,mainstreamtheoryheldthatflexibleexchangerateswouldinsulatetheworldeconomyfromidiosyncraticshockstosinglecountries(D’IppolitiandRoncaglia,2023).Inpractice,thenastoday,internationalmonetaryarrangementshavebehaveddifferently,resultinginstrongco-movementofinflationacrosscountriesascanbeseenfromFigure1(seeFiguresS1andS2inthesupplementarymaterial).

Figure1–Synchronizationofinflationinasampleofcountries(consumerpriceindexes,

annualrateofchange,1960-2023).

Source:authors’elaborationonWorldBankcross-countrydatabaseofinflation.

Theactualworkingoftheinternationalmonetarysystem,whichdiffersfromstandardtheoreticalexpectations,maythereforerepresentoneimportantexplanationfortheobservedsynchronizationofinflationovertime.Butnewtrendstoo—atleastglobalizationandfinancializationoftheeconomy—mustenteranexplanationofrecentevents.

Inthiswork,weasktowhatextentitismeaningfultospeakof‘internationalinflation’,inthesenseofacohesivephenomenon(followingBiasco,1979)wheretheinteractionamongopeneconomiesisitselfacauseoraconstraintoninflation.Putsimply,wecontendthattheextenttowhichdomesticinflationarypressurestranslateintosustainedinflationdependsimportantlyontheinternationalcontext,whichmayconstrainorenabletheirmanifestation.Otherwise,adjustmentoccursthroughquantitiessuchasincomeandoutputratherthanprices,exceptintheextremecircumstancesofepisodesofhyperinflation,whichwedonotconsiderhere.1Asidefromthoseextremecases,inflationmustbeunderstoodasaninternationalstory.

1Hyperinflationisacasewherearguably,beyondacertainpoint,quantitativedifferencesbecomequalitative,anddistinctandseparatetheoreticalapproachesarenecessary.Indeed,todemarcateinflationfromhyperinflationaruleofthumbproposedbyHeymannandLeijonhufvud(1995)couldbeuseful:wetalkaboutthelatterphenomenonwhen

Atthemostabstractlevel,macroeconomicmodelsimplicitlyorexplicitlyconsiderthreemarkets:thelabormarket,onwhichfunctionalincomedistributiondepends;therealmarketforgoodsandservices,thatinthePost-Keynesian,NewKeynesian,andNewConsensusapproachesdeterminesthelevelofaggregatedemandandthereforethelevelofactivity;andthemoneyandfinancialmarket,determiningthenominalinterestrateandassetprices.Correspondingly,atameta-theoreticallevelwecanclassifytheoriesofinflationinthreegroupsasshownintable1:conflictinflation,realmarket(eithercost-pushordemand-pull),andmonetarist.Evidently,intheactualexplanationofconcretecasesmorethanoneapproachcouldbeemployed.

Table1–Meta-theoreticalapproachestoinflation

Exampleculprits

Exampleculprits

International

inflation

Labor

market

Real

market

Money&finance

Domesticinflation

Conflict

inflation;

wage–price

spirals

Wage

bargaining;

markups

Institutionsanddistribution

Capitaland

labormobility;industrialpolicy

Demand-pull/

cost-push

Fiscalpolicy;

exogenous

shocks

Globalization

macro-

imbalances;

GVC;market

forms

Monetarist/

financial

channels

Monetary

policy;credit

cycles

Financialization

Globalliquidity;

GlobalFinancial

Cycle

Inthiswork,wearguethatthesametripartiteclassificationhelpstostudyinflationasaninternationalphenomenon,providedthatitisinterpretedasaheuristicratherthanasasetofmutuallyexclusivetheories.Eachfamilyoftheorieslocatestheoriginofinflationarypressureinonemarket;noneofthem,inaworldofendogenousmoneyandnominalrigidities,canexplainwhyachangeinrelativepricesbecomesasustainedriseinthegeneralpricelevelwithoutappealingtothereactionsofotheragents.Thisistheinsightoftheconflictapproach(Rowthorn,1977;Hein,2024):shockstocostsortodemandalterthedistributionofincomeimpliedbyexistingprices,andinflationpersistsonlywherethosewholosefromthechangecanresistitbyraisingtheirownpricesorwages.Wesharethisdiagnosis,anditisthethreadthatrunsthroughthethreemechanismsdiscussedbelow.Wedonot,however,takethefurther

marketoperatorsstartconsideringmonthlyratherthanyearlypricechanges.Forthisclassofphenomena,HeymannandLeijonhufvud(1995)consideredmoneycreationasthecentralcausalmechanism.

stepoftreatingconflictwithinthelabormarketastheuniversaldefinitionofinflation.Thethreemarketsidentifydifferentactors(workersandfirms;surplusanddeficiteconomies;financialintermediariesandendusers),differentinstrumentsofresistance(wages;exchangeratesandtradebalances;liquidityandassetprices)anddifferentmarginsofadjustment.Ourclaimisnarrower:ineachofthethreemarkets,thecapacitytoshiftortoresistadjustmentisdistributedacrossnationalborders,notonlywithinthem.Globalvaluechainsandcapitalmobilityaltertherelativefallbackpositionsofcapitalandlabor;thehierarchyofcurrenciesandtheasymmetryofbalanceofpaymentsadjustmentaltertherelativepositionsofcountries;globalliquidityalterswhosetsthepricesofcommoditiesandfinancialassets.Inflation,inthisreading,isthevisibleoutcomeofaninternationallystructureddistributionofthepowertoadjust.

Wecoveroneexampleforeachmarket:institutionsandregulationofthelabormarketsundercapitalmobility;persistentbalance-of-paymentsasymmetriesandpriceleadershipintherealmarkets;financializationandgloballiquidityinthemoneyandfinancialmarkets.Throughout,wedistinguishthreekindsofempiricalmaterialandlabelthemrespectively:stylizedfacts,whichwetakeasestablishedandwhichanytheoryofinflationmustaccommodate;illustrativeassociations,whichareconsistentwiththemechanismweproposebutdonotclaimthatbythemselvestheyprovideadefiniteproofinthesenseofdiscriminatingitfromalternativeexplanations;andhypotheses,whichwestateinaformthatfutureworkcantest.Ouraimistooutlinearesearchagenda,andtobeclearaboutwhattheevidencepresentedherecanandcannotsupport.

Ourargumentproceedsasfollows.Section2summarizestheinflationdebateduringandafterCovid,focusingonhigh-incomeeconomiesthatattractthemostattentionfromeconomists.Section3addressesimportedinflation,typicallydiscussedinrelationtomid-andlow-incomecountries.Bypresentingbasicdatatrendsandtheirinterpretationintheliterature,thesesectionsshowhowinflationisoftenseenasadomesticissueor,atmost,anexogenousshockfromtheexternalenvironment.Next,section4reviewsevidenceofinflationsynchronizationacrosscountriesandtwoemergingliteraturesontheinternationaldimensionofinflation,whichstilllargelyreflectadomesticframing.Bycontrast,sections5,6,and7developourmainargumentthroughthreemechanismsofinternationalinflation.Section8concludeswithsuggestionsforaresearchagendaoninternationalinflation.

Ourcontributionisconceptualandagenda-settingratherthanempirical.Agrowingliteraturealreadydocumentsadominantglobalfactorininflation(CiccarelliandMojon,2010;Haetal.,2023),anda“globe-centric”strandattheBISholdsthatglobalslackdrivesdomesticinflation(BorioandFilardo,2007;Aueretal.,2017;AscariandFosso,2024).Thatwork,however,typicallyaggregates:itredefinestherelevant“domestic”conditionsatworldscale,preservingthelogicoftheclosed-economymodel.Wetakeadifferentroute:weaskwhetherinflationisgeneratedintheinteractionbetweeneconomies;whether,andtowhatextent,domesticinflationarypressurestranslateintopricesdependsontheinternationalcontext,withadjustmentotherwisefallingonquantities(incomeandoutput).

2.TheinflationdebatesintheadvancedeconomiesbeforeandsinceCovid

AftertheGFC,centralbanksacrossadvancedeconomiesandinmanyemerginganddevelopingonespursuedstronglyexpansionarymonetarypolicies.Yet,inflationremainedsubduedinmostcountries;attentionthereforeshiftedtothelabormarket.Thecoexistenceofdivergentnationallabor-marketconditionswithuniformlylowinflationgeneratedadebateontheflatteningofthePhillipsCurve(henceforthPC).Explanationsincludedmorecrediblemonetarypolicyandlowerpricestickinessingoodsmarkets(Occhino,2019).Otheraccountsemphasizedinternationalinfluences,suchascapitalflowsorthe“Chinashock”,butgenerallytreatedthemasexternalfactorsactingondomesticlabormarkets(Eichengreenetal.,2021),ratherthananalyzingthemasoutcomesofpersistentinternationalinstitutionalandfinancialarrangements.Thisdomesticframingbecameevenclearerinthedebateonthepost-Covidinflationsurge.

Fromlate2021,inflationsurgedalmostsimultaneouslyacrossadvancedandemergingeconomies.Onceagain,manyinfluentialinterpretationsframedinternationalinfluencesasexogenousshocks,particularlysupplydisruptionsandenergypriceincreases.Thedebatefirstfocusedontherealmarket,wherethecentralissuebecamewhetherinflationwascost-push,demand-pull,oracombinationofthetwo.Supply-sideexplanationsemphasizedglobalbottlenecks,disruptionsinproductionnetworks,andenergyprices,whichwereparticularlyrelevantinEurope.Theseaccountstypicallylinkedinflationtothepandemic-inducedreorganizationofdemandandsupply,whichgeneratedshortagesinintermediateinputsandsharpincreasesintransportationandenergycosts.Incontrast,demand-sideexplanationsstressedlargefiscaltransfersandthereleaseofaccumulatedsavingsduringthepandemic,especiallyintheUnitedStates,wheredemandeffectsappeartohavebecomemoreprominentovertime(BernankeandBlanchard,2024;FergusonandStorm,2023).

Whiledifferinginemphasis,bothperspectivesinterpretinflationastheresultofshocksimpingingondomesticeconomies.IntheUnitedStates,thisviewcrystallizedintoarelativelycoherent“establishmentnarrative”,whichemphasizedfiscalexpansionanddemandpressuresastheprimarydriversofinflation(FergusonandStorm,2023).Forafiscal-theoryreadingofthesameepisode,seeCochrane(2024).Evenwhenmorecomplicatedexplanationswereproposed,suchasanonlinearPhillipscurve(Hardingetal.,2023),globaldynamicscontinuedtoenterthereflectionsoninflationmainlyasdisturbances.

Theconceptualizationofendogenousmechanismswastypicallyconfinedtosecond-roundeffects,particularlywage–pricespirals.Inthissense,thereisaconvergencebetweenmainstreamapproaches,whichincreasinglyacknowledgedistributivetensions(LorenzoniandWerning,2023),andmoreradicalpost-Keynesianconflictviews(Hein,2024),despitetheirdifferenttheoreticalfoundations.Theconflictmodelsarethemostexplicitontheinternationaldimension:inWildaueretal.(2023)andHein(2024)animportedenergypricerisesetsoffaconflictoverthedistributionoftherealincomeloss,andinflationlastsaslongastheconflictdoes;buttherestoftheworldentersonlyasthesourceoftheshock,notasapartytothe

conflict.Onthewhole,evenwheninflationisrecognizedasaglobalphenomenon,itisgenerallyexplainedthroughdomestictransmissionmechanisms.Someauthorsdescribethepost-pandemicepisodeasacaseof“sellers’inflation”,inwhichsupplyshocksfacilitatedcoordinatedpriceincreasesacrossfirms(WeberandWasner,2023).Othersarguethatrisingmarginspartlyreflectedincreasesinthecostsofintermediateinputs,particularlyenergy,ratherthanpurelystrategicpricingbehavior(Lavoie,2024;HahnandRenault,2024).Inbothcases,theunderlyingnarrativecontinuestorelyonexogenousshocks(whethersectoralorglobal)astheinitialimpulse.Theroleofdistributionalconflictisacknowledged,buttypicallyasamechanismthatamplifiesexternallygeneratedpricepressures.

Finally,althoughthedebatehaslargelyfocusedonrealandlabormarkets,monetaryexplanationshavealsore-emerged.SincetheprolongedperiodofexpansionarymonetarypolicyaftertheGFCdidnotgenerateinflation,earlydiscussionscenteredonwhethercentralbankshadreactedtooslowlytotheinitialinflationsurge.Subsequently,someauthorsarguedthatmonetarypolicyitselfmayhavecontributedtoinflation,eitherthroughlongandvariablelagsorthroughnonlineareffectsthatmakemonetaryexpansionmoreimpactfulinhigh-inflationenvironments(Borioetal.,2024;Wieladek,2023).Yetthisshifttoodoesnotfundamentallychangetheframingoftheproblem.Intheseaccounts,inflationdynamicsareunderstoodasfundamentallydomestic,withmonetarypolicyactingeitherasadelayedresponseorasanamplifyingfactor.Cross-countrysynchronizationisstillexplainedbycommonshocksorparallelpolicyresponses.

Insummary,althoughtherecentinflationdebatehasrecognizedthesimultaneityofinflationdynamicsacrosscountries,ithaslargelyexplainedthisphenomenonthroughsymmetricshocksorsynchronizeddomesticresponses.Whatremainslargelymissingisthepossibilitythatinflationemergesfromtheinteractionamongopeneconomiesthemselves,asastructurallyglobalphenomenonratherthantheoutcomeofcontemporaneousnationalprocesses.

3.Exchange-ratepass-throughandtheglobalstructureofinflation

Theopen-economydimensionofinflationistheobjectofaseparateandspecializedliteraturethatmostlyfocusesonlow-andmiddle-incomecountries.Itdoesnotconsiderinternationalinflationinoursense(asacohesivephenomenonarisingfromtheintegrationofdifferenteconomies)butitcertainlyallowsustotakeastepfurtherintermsofrealismoftheanalysis.Indeed,alargeempiricalliteraturehasexaminedtheextenttowhichexchange-ratemovementsaretransmittedintodomesticprices(Krugman,1979;Jašováetal.,2019;Gopinathetal.,2020;

Wangetal.,2022).Thisliteraturetypicallyfindsthattheexchange-ratepass-through(ERPT)isincomplete,variesacrosscountriesandovertime,andexhibitsasymmetrybetweendepreciationsandappreciations(Carrière-Swallowetal.,2025).Morerecentcontributionshaveemphasizedtheroleofglobalfactors,suchascommodityprices,globaldemand

conditions,andinternationalfinancialcycles(Cesa-Bianchietal.,2024;Flaccadoro,2024;Mirzaetal.,2023).Theseworkstypicallyfocusonlow-incomeeconomies,butimportedinflationisincreasinglyinvestigatedinhigh-incomeeconomiesaswell.Specifically,anumberofcontributionsexaminespecifictransmissionmechanismslinkinginternationalconditionstodomesticprices:MonacelliandSala(2009)highlighttheroleoftradablegoodsascarriersofexternalshocks;Amitietal.(2019)showhowvariablemarkupsdampenthepass-throughofinternationalshockstodomesticprices;Forbes(2019)analysestheimpactofglobalizationonnationalPhillipscurves;andKohlscheenandMoessner(2022)documenttheweakeningoftherelationshipbetweenlaborcostsandprices.Morerecentworkemphasizesglobalsupplychainsandexternalshocksaskeydriversofnationalinflationdynamics(Shapiro,2024;Garrónetal.,2024).Whilethesestudiesidentifyimportanttransmissionchannels,theygenerallyinterpretinternationalfactorsasexternalinfluencesonanotherwisedomesticinflationprocess.Againstthisbackground,theaimofthissectionistoassessthequantitativeimportanceofexchange-ratemovementsrelativetothebroadercommoncomponentininflationdynamics.

Asanillustrativeexercise,weestimateasimplepanelmodelofinflationdynamicsusingquarterlydata.Quarterlyfrequencyisadoptedasthemainspecification,aspass-throughmechanismsareunlikelytooperatefullyatthemonthlylevelandtheuseoflower-frequencydataisstandardintheempiricalliterature(e.g.CampaandGoldberg,2005;ChoudhriandHakura,2006).Inflationismeasuredasthequarterlylogchangeintheconsumerpriceindex,whileexchange-ratemovementsareconstructedsothatpositivevaluescorrespondtoanappreciationofthedomesticcurrency.

Thebaselinespecificationis:

πit=α+β1ΔExit+β2(ΔExit×D)+β3D+εit(1)

whereπitdenotesinflationincountryiattimet,ΔExitistheexchange-ratechange(instantiatedastheNEERinTable2andthebilateralUSdollarexchangerateinTableS1in

thesupplementarymaterial),andDisadummyvariableequaltooneinperiodsof

appreciation.Thisspecificationallowstheresponseofinflationtodifferbetweendepreciationandappreciationepisodes.Inparticular,β1capturestheeffectofexchange-ratechangesduringdepreciations,whiletheeffectduringappreciationsisgivenbyβ1+β2.Weestimateasequenceofmodels,movingfromsimplepooledregressionstospecificationsincludingcountryandtimefixedeffects.Countryfixedeffectscontrolfortime-invariantstructuraldifferencesacrosseconomies,whiletimefixedeffectsabsorbcommonshocksorothersharedtimecomponentsaffectingallcountriessimultaneously,suchasglobalcommoditypricecycles,supplydisruptions,andinternationalfinancialconditions.Thisempiricalanalysisisbasedonaquarterlypaneldatasetcoveringabroadsampleofadvancedandemergingeconomiesovertheperiod2000–2025.Thesampleincludesmajoradvancedeconomiesaswellasarangeofemergingmarkets,ensuringsubstantialcross-countryvariationininflation

regimesandexchange-ratedynamics(afulllistofcountriesisreportedinTableS2inthesupplementarymaterial).Theestimationsamplecomprises62countriesand6,061country-quarterobservationsbetween2000Q2and2025Q2.2

Exchange-ratemovementsarecapturedusingthenominaleffectiveexchangerate(NEER)and,inacomplementaryspecificationreportedinTableS1,thebilateralexchangeratevis-à-vistheUSdollar.Tolimittheinfluenceofextremeobservations,thesampleexcludesobservationswithunusuallylargeinflationorexchange-ratechanges(seenotesbelowthetable).Table2reportstheresultsforthenominaleffectiveexchangerate(NEER),whichcapturesbroadexternalexposure.Inthebenchmarkspecification,theaverageassociationisnegativeandstatisticallysignificant,butsmall:adepreciationof1percentisassociatedwithanincreaseinquarterlyinflationofabout0.07percentagepoints,andthemodelexplainslittleofthevarianceofinflation.Introducingasymmetrychangesthepicture:depreciationepisodesareassociatedwithsubstantiallylargerincreasesininflation(β₁=−0.137inthepooledspecification),whilethepositiveinteractiontermindicatesthatappreciationshaveamuchweakereffect.Theimpliedmarginaleffectsconfirmtheasymmetry.Inthepooledspecification,theappreciationeffect(阝1+阝2)ispositiveandsignificant,butsmall(0.047);oncecountryfixedeffectsareincludeditbecomesindistinguishablefromzero,anditremainssowithcountryandtimefixedeffects.Bycontrast,theeffectofdepreciationsremainsstatisticallysignificantthroughout.Inthepreferredtwo-wayfixed-effectsspecification,β₁=−0.089(p<0.01),whiletheimpliedappreciationeffect(β₁+β₂)=−0.002isnotstatisticallydifferentfromzero(p=0.91).

Thispatternisconsistentwithstronglyasymmetricexchange-ratepass-through:depreciationsgenerateinflationarypressures,whileappreciationsdonotproduceacorrespondingdisinflationaryeffect.Theappreciationdummy,whichallowsforaninterceptshiftbetweenregimes,isnotsignificantoncefixedeffectsareincluded(theasymmetryliesintheslopes).3InthetermsofSection1,theexercisedocumentsanillustrativeassociationbetweencontemporaneousexchange-ratechangesandinflation,andweusethetermpass-throughinthisdescriptivesense.

2Country-by-countryunitroottestsrejectnon-stationarityfortheexchange-ratechangeinnearlyallcountriesandforinflationinabouttwothirdsofthem,withamedianfirst-orderautocorrelationofquarterlyinflationof0.34:bothvariablescanbetreatedasstationarybutpersistent.Sinceinflationisseriallycorrelatedwithincountries,wereportstandarderrorsclusteredbycountry;heteroskedasticity-robuststandarderrorsareabouthalfaslargeandwouldoverstateprecision.

3Twoextensions,reportedinTablesS3andS4ofthesupplementarymaterial,qualifythepicture.Pass-throughisdynamic:withfourlagsoftheexchange-r