Migration and inflation nexus under high and low interest rate environments: Some panel data evidence

Abstract

This study analyzes the relationship between migration and inflation as well as the intervening role of interest rates in selected OECD countries from 1995 to 2020, covering periods of turbulence and tranquillity. The study finds that migration increases inflation in the short run but lowers it in the long run. In other words, the inflationary effect of migration is a long-run phenomenon. Additionally, we find that the high interest rates help mitigate the inflationary effect of migration in the short run relative to the low interest rates. Moreover, additional analysis using the panel threshold technique further lends credence to the mediating role of interest rates in the nexus, thus making our results robust to alternative estimation techniques. These findings have significant implications for policymakers responsible for managing inflation.