ASYMMETRICAL IMPACTS OF GLOBAL DRIVERS ON INFLATION: EVIDENCE FROM NEW-KEYNESIAN PHILLIPS CURVE

This study examines inflation dynamics by introducing global factors to the New Keynesian Phillips Curve (NKPC) under various inflation conditions for developed countries from January 1998 to December 2022. The Threshold VAR (TVAR) model is employed to identify potential nonlinearity arising from asymmetric responses to shocks and regime switching. The results indicate a negative relationship between the inflation and unemployment, with the exception of Germany and Japan in high inflation conditions. Expected inflation has an important impact on inflation. Moreover, the variance between the 10-year government bond rate and the 3-month interbank rate leads to an increase in inflation during high inflation regimes. As for global factors, global supply chain pressure has a more pronounced impact on inflation during low inflation conditions, whereas changes in oil and commodity prices have a greater effect on inflation during high inflation conditions. The findings show that central banks have become more effective at stabilizing economies against domestic shocks, but challenges remain with external shocks.