As part of the series of the „Finance Research Seminar“, VGSF welcomes Ines Chaieb from University of Geneva to present her research paper.
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Paper
How is Inflation Priced in Global Markets ?
(joint with Vihang Errunza and Novdeep Smag)
We examine how inflation risk is priced in 38 markets from 1989 to 2022. International markets feature distinct persistence and volatility of their inflation components. Further, the shares of core, energy, and food in the consumer basket differ significantly across countries. Hence, we separately model the inflation components in partially segmented markets allowing for time variation in the risk factors and their prices. We find shocks to core inflation command global and local risk premiums, while shocks to food and energy inflation are only priced locally in some countries, especially in emerging markets. Our study provides new insights into the dynamics of different inflation components and highlights the importance of distinguishing between global and local inflationary forces.
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