Drivers of inflation convergence across countries: the role of standard gravity variables

Abstract Using monthly headline inflation data covering 184 countries for the period between January 1971 and December 2020, this paper investigates role of standard gravity variables on convergence across country pairs. The analysis by unit root tests is based ten-year rolling windows to control potential structural changes over time, whereas corresponding results are connected in preceding year investigate drivers its speed. Regarding existence convergence, empirical show that having a common currency, free trade agreement, proximity, border, or colonial relationship increases probability convergence. speed very same shown reduce half-life In both cases, effects currency dominate those other variables.