Template-Type: ReDIF-Paper 1.0 Author-Name: Mai Chi Dao Author-Name-First: Mai Chi Author-Name-Last: Dao Author-Email: Author-Workplace-Name: International Monetary Fund Author-Name: Pierre-Olivier Gourinchas Author-Name-First: Pierre-Olivier Author-Name-Last: Gourinchas Author-Email: Author-Workplace-Name: International Monetary Fund Author-Name: Daniel Leigh Author-Name-First: Daniel Author-Name-Last: Leigh Author-Email: Author-Workplace-Name: International Monetary Fund Author-Name: Prachi Mishra Author-Name-First: Prachi Author-Name-Last: Mishra Author-Email: prachi.mishra@ashoka.edu.in Author-Workplace-Name: Ashoka University Title: Understanding the International Rise & Fall of inflation since 2020 Abstract: This paper analyzes inflation dynamics in 21 advanced and emerging market economies since 2020. We decompose inflation into core inflation as measured by the weighted median inflation rate, and headline shocks––deviations of headline inflation from core. Headline shocks occurred largely on account of energy price changes, although food price changes and indicators of supply chain problems also played a role. We explain the evolution of core inflation with two factors: the strength of macroeconomic conditions—measured by the unemployment gap, the output gap, and the ratio of job vacancies to unemployment—and the pass-through into core inflation from past headline shocks. We conclude that the international rise and fall of inflation since 2020 largely reflected the direct and pass-through effects of headline shocks. Macroeconomic conditions generally played a secondary role. In the United States, estimated price pressures from strong macroeconomic conditions had been greater than in other economies but have eased. length: 36 Creation-Date: 20240809 Revision-Date: Publication-Status: File-URL:https://dp.ashoka.edu.in/ash/wpaper/paper119_0.pdf File-Format: Application/pdf Number: 119 Keywords: core inflation Keywords: inflation Keywords: inflation shocks Keywords: labor market tightness Keywords: median inflation Keywords: Phillips Curve Handle: RePEc:ash:wpaper:119