An Empirical Study on the Effect of Inflation Transmission

This paper aimed to analyze the international transmission of inflation and explore the existence of inflation between U.S. and some representative countries before the outbreak of the global financial crisis. Therefore, 14 countries or regions (including developed countries, developing countries and less developed countries) were selected, such as U.S., China, Canada, Japan, etc. Their consumer price index (CPI) between 1990 and 2008 was analyzed. Through the co-integration test and the Granger causality test, the results revealed that the effects of the United States upon the inflation transmission to France, Italy and most of the developing countries were quite limited, but effective upon the inflation transmission to Japan, UK, Korea and China.