Bank for International Settlements publishes cross-country research on inflation cycles and recession risk in high-inflation regimes

The Bank for International Settlements (BIS) published a working paper that defines three complementary measures of “inflation cycles” and uses long-run international consumer price index data to document common patterns across advanced and emerging market economies. The paper also links inflation regimes to macro outcomes, finding that entry into a high-inflation regime is associated with a materially higher probability of recession in subsequent quarters, and it makes a cross-country dataset of the inflation-cycle measures publicly available. Using a panel of 27 economies, the analysis finds that peak-to-peak inflation cycles average around seven years and are remarkably stable over time and across countries. By contrast, cycle amplitudes decline markedly after 1985, with the median amplitude in advanced economies falling from 4.1 to 2.1 percentage points and in emerging market economies from 6.5 to 4.5 percentage points. Cross-country inflation co-movement is stronger in advanced economies and tends to rise when inflation is elevated, while detrended inflation is generally more idiosyncratic in emerging markets except during the post-Covid high-inflation period. For regime dating, the paper proposes a rule of thumb that classifies high inflation when year-on-year inflation rises more than 2 percentage points above its five-year moving average and remains at least 1 percentage point above that moving average for at least five quarters. Panel local projections suggest that entering a high-inflation regime increases recession probability by about 10 percentage points over the following year, with similar results when using an onset measure based on detrended inflation.