What Starts Inflation: Evidence from the OECD Countries

Abstract

We use a pooled cross-country time series framework to study the factors associated with the start of 73 inflation episodes in OECD countries since 1960. We find that policy-makers' pursuit of high real growthtargets and national elections were important factors in initiating inflation episodes. U.S. inflation turns out to be a triggering event for simultaneous outbreaks of inflation across countries. Several other explanations for inflation starts, including increases in the natural rate of unemployment, oil price shocks, changes in the political orientation of governments, and government debt policy, are not supported by the data.

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