E-mail alert  |  Contact  
Search:       Go  
Background  |   Sponsoring institutions  |   Editorial board   |   Advisory board   |   Associate editors
Call for papers  |   Submission guidelines  |   Editorial process
Current issue  |   Past issues  |  
March 2012 issue
List of authors
 
Coletti, Devereux, Levin, Walsh, Williams
Lama, Medina
Faust
Glocker, Towbin
Bordo, Humpage, Schwartz
King
Ferrucci, Jiménez-Rodriguez, Onorante
Lipínska, Millard
Hamilton
IJCB Home   Read the journal   Past issue
Past issues
2017
 
December
September
June
March
February
2016
 
December
September
June
March
2015
 
December
September
June
March
January
2014
 
December
September
June
March
2013
 
December
September
June
March
January
2012
 
December
September
June
March
January
2011
 
December
September
June
March
2010
 
December
September
June
March
2009
 
December
September
June
March
2008
 
December
September
June
March
2007
 
December
September
June
March
2006
 
December
September
June
March
2005
 
December
September
May

Tailwinds and Headwinds: How Does Growth in the BRICs Affect Inflation in the G-7?

by Anna Lipínskaa and Stephen Millardb

Abstract

In this paper, we analyze the impact of a persistent productivity increase in a set of countries - which we think of as the economies of Brazil, Russia, India, and China (BRIC) - on inflation in their trading partners, the Group of Seven (G-7). In particular, we want to understand the conditions under which this shock can lead to tailwinds or headwinds in the economies of trading partners. We build a three-country dynamic stochastic general equilibrium (DSGE) model in which there are two oil-importing countries (home and foreign) and one oil-exporting country. In our benchmark calibration, we find that the tailwind effect, lowering inflation in the home economy, dominates the headwind effect. However, if the oil demand elasticity is low (equal to the empirical short-run estimate) or the labor market is flexible, inflation at home rises in the subsequent periods as a result of the foreign productivity shock.

JEL Codes: E12, F41, E31.

 
Full article (PDF, 40 pages 880 kb)

Discussion by Paul Beaudry


a Federal Reserve Board
b Bank of England and Durham Business School