A discussion paper, published today by the Deutsche Bundesbank, finds there is a "significant" spillover effect from supply and demand shocks in China to inflation outcomes in the rest of the world.
In China's Role in Global Inflation Dynamics, authors Sandra Eickmeier and Markus Kühnlenz analyse the "propagation mechanism" through which shocks are transferred, using quarterly macro-economic data from 37 countries during the period 2002–11. They find that, on average, 5% of inflation in each cou
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