Inflation in Disaggregated Small Open Economies Inflation in Disaggregated Small Open Economies

High inflation during the COVID-19 pandemic was not limited to the United States and the eurozone, where it reached 8 percent and 8.4 percent, respectively, in 2022. Researchers have devoted much attention to those large economies while, for the most part, overlooking small open economies, which on average experienced an inflation rate of about 10 percent in 2022. This paper focuses on the latter group of countries. Specifically, it studies inflation in small open economies that have production networks to gain insight into how such networks may affect the reaction of a country’s consumer price index (CPI) to sectoral technology shocks, factor price changes, and import price changes.

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