The framework used here is based on a restricted backward-looking version of the Phillips curve. The constant in the current framework represents the mean of the dependent variable (the selected measure of core inflation), which is close to the official inflation target of 2 per cent and, as such, represents relatively well-anchored expectations of inflation in the past.
Against this background, the process of manufacturing finished goods has been increasingly carried out across a number of countries to take advantage of differences in the degree of technological progress, the make-up of the labor force, the condition of infrastructure, and the efficiency of public services. Interrelationships among economies have also been strengthened through integrating production processes across borders.