  We analyze the forces that explain inflation using a panel of 122 countries
from 1997 to 2015 with 37 regressors. 98 models motivated by economic theory
are compared to a gradient boosting algorithm, non-linearities and structural
breaks are considered. We show that the typical estimation methods are likely
to lead to fallacious policy conclusions which motivates the use of a new
approach that we propose in this paper. The boosting algorithm outperforms
theory-based models. We confirm that energy prices are important but what
really matters for inflation is their non-linear interplay with energy rents.
Demographic developments also make a difference. Globalization and technology,
public debt, central bank independence and political characteristics are less
relevant. GDP per capita is more relevant than the output gap, credit growth
more than M2 growth.
