In the last two decades, monetary authorities in emerging and developing economies have adopted inflation targeting. However, such structural reforms have had little success in counteracting persistent inflationary inertia. A probable explanation is the existence of global inflationary factors,...

This paper develops a new methodology that decomposes shocks into homoscedastic and heteroscedastic components. This specification implies there exist linear combinations of heteroscedastic variables that eliminate heteroscedasticity. That is, these linear combinations are homoscedastic; a...