Is Digitalization Driving Domestic Inflation?

Download or read book Is Digitalization Driving Domestic Inflation? written by Mr.Balazs Csonto and published by International Monetary Fund. This book was released on 2019-12-06 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the extent to which digitalization—measured by a new proxy based on IP addresses allocations per country—has influenced inflation dynamics in a sample of 36 advanced and emerging economies over 2000-2017. Phillips curve estimates show that digitalization has a statistically significant negative effect on inflation in the short run. Its economic impact is not large but has increased since 2012 and mainly operates through a cost/competition channel. Principal components and cointegration analysis further suggest digitalization is a key driver of lower trend inflation.