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This paper revolves around the question "Is there inflation transmission across contries?". You are required to find an appropriate univariate time series model, using the Box-Jenkins procedure for each of the inflations rate series. Also, briefly comment on your findings.
Topic: Is there inflation transmission across countries?
Download the quarterly data on the consumer price index from the OECD database from 1970:1 to 2015:4 for the US, UK, Japan, and one more OECD country of your choice. Use these data to model the quarterly inflation rate for each country.
(a) For each of the inflation rate series find an appropriate univariate time series model, using the Box-Jenkins procedure. Briefly comment on your findings. (50 marks)
(b) Estimate a vector auto regressive model for the sample of four countries (US, UK, Japan, and the country of your choice). Evaluate and plot impulse responses, paying attention to the ordering of shocks in Cholesky decomposition. Report and comment on the variance decomposition. Is there evidence of transmission of the transmission of shocks to the inflation rate across countries in your sample? Briefly summarize your findings. (50 marks)
Please including all data tables, graphs, and data analysis details.