Working Paper

Core Inflation in the Advanced Economies: A Regional Perspective

Abstract: We explore differences in the dynamics of core inflation between Europe and North America using a Bayesian time series filter that decomposes the level of core inflation in the major advanced economies into regional, global, and country-specific components. We find a prominent role for both regional and global factors. Historically, the two regional components have at times diverged. Using reduced-form regressions, we examine the economic drivers behind the changes in our estimated global and regional components of U.S. core inflation, focusing on the post-pandemic inflation surge and subsequent pullback. The global component is associated with global supply frictions and past energy shocks. The North American regional component is associated with labor market tightness in the region.

JEL Classification: C11; C32; C53; E31; F00;

https://doi.org/10.17016/IFDP.2025.1421

Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: International Finance Discussion Papers

Publication Date: 2025-09-19

Number: 1421