Paper Title

Abstract - Purpose: This study explores how inflation synchronization beyond the change in inflation level shapes from the working of the close linkage generated by the GVCs. Against the recent background of the dull trade integration after the COVID-19 disaster, we contribute to verify the strong correlation between global trade and inflation co-movement. Methodology: We investigate the impacts of devaluation, value-added trade, monetary growth, and trade integration on both domestic inflation and synchronized inflation by using PPP and GVCs-trade models. Also, we examine information about future changes in inflation by using GVCs-trade VAR. Our evidence supports the view that the expansion of GVCs trade and the change in exchange rate have been key global factors in determining domestic inflation and synchronized inflation. Findings: It appears possible to use significant panel variables or panel indicators for an increase in synchronized inflation: synchronized inflation is increasingly affected by devaluation (Group 3) and value-added exports (Group 1, 2, 3) while synchronized inflation is increasingly forecasted by value-added exports and money supply over the one-year (Group 3) horizon. By contrast, a decline in synchronized inflation is affected by trade integration (Group 1, 2) and is predicted by trade integration over the one-year (Group 2, 3) horizon. Also, it appears possible to use significant variables or indicators for domestic inflation, differently from country to country. Implication: Recent controlling for the impact of GVCs may have limitedly worked explanatory power the other way round. The monetary policy needs to notice that a recent greater role of global factors is hardly controlled by national central banks. Keywords - Exchange Rate, Global Value Chain, Inflation Synchronization, Trade in Value-added