Globalisation and monetary policy
AbstractGlobalisation, which has been accelerating since the mid nineties, has triggered important economic changes. The article deals with three possible consequences of globalisation which might be relevant for monetary policy. Possible implications for the conduct of monetary policy are also discussed. The driving force behind the observed low and stable inflation seems to be the enhanced conduct of monetary policy, rather than globalisation. Nevertheless, the emergence of low-cost countries implies some major relative price shifts as commodity prices increase and prices of manufactured goods decline in relative terms. Although neutral in the long run, these relative price changes might pose a challenge for monetary policy, as globalisation is an enduring phenomenon. Therefore, monetary policy analysis should now, more than ever, be based upon a broad range of information and indicators, from which both downward and upward risks to price stability can be inferred. The globally observed flattening of the Phillips curve can be explained by both better monetary policies and structural economic changes, such as globalisation. This flatter Phillips curve would suggest that, in terms of output losses, the short-term costs of disinflation are higher. Given that the flattening of the Phillips curve results from better monetary policies, and that globalisation dampens the inflationary impact of cost push shocks, this finding must be qualified however. Global financial integration partly explains the increased international synchronisation of long term interest rates. At the same time, a weaker correlation between policy rates and longer term interest rates can be observed. These findings suggest that the traditional interest rate channel has become less effective. Given that better anchored inflation expectations are the main reason for this weakening link, one can qualify this finding too. Moreover, communicating information on the economic and monetary analysis can be an important additional tool to steer longer term market interest rates.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by National Bank of Belgium in its journal Economic Review.
Volume (Year): (2006)
Issue (Month): II (September)
Contact details of provider:
Postal: Boulevard de Berlaimont 14, B-1000 Bruxelles
Phone: (+ 32) (0) 2 221 25 34
Fax: (+ 32) (0) 2 221 31 62
Web page: http://www.nbb.be/
More information through EDIRC
globalisation; monetary policy; Phillips curve;
Find related papers by JEL classification:
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- F15 - International Economics - - Trade - - - Economic Integration
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Matteo Ciccarelli & Benoît Mojon, 2007.
Kiel Working Papers
1337, Kiel Institute for the World Economy.
- Matteo Ciccarelli & Benoît Mojon, 2005. "Global Inflation," Working Papers Central Bank of Chile 357, Central Bank of Chile.
- Matteo Ciccarelli & Benoît Mojon, 2008. "Global inflation," Working Paper Series WP-08-05, Federal Reserve Bank of Chicago.
- Ciccarelli, Matteo & Mojon, Benoît, 2005. "Global inflation," Working Paper Series 0537, European Central Bank.
- Michael Woodford, 2005.
"Central Bank Communication and Policy Effectiveness,"
NBER Working Papers
11898, National Bureau of Economic Research, Inc.
- Michael Woodford, 2005. "Central bank communication and policy effectiveness," Proceedings, Federal Reserve Bank of Kansas City, issue Aug, pages 399-474.
- Michael Woodford, 2005. "Central-bank communication and policy effectiveness," Discussion Papers 0506-07, Columbia University, Department of Economics.
- Hans Christiansen & Charles Pigott, 1997. "Long-Term Interest Rates in Globalised Markets," OECD Economics Department Working Papers 175, OECD Publishing.
- Fagan, Gabriel & Henry, Jerome & Mestre, Ricardo, 2005. "An area-wide model for the euro area," Economic Modelling, Elsevier, vol. 22(1), pages 39-59, January.
- Eugenio Gaiotti, 2008.
"Has globalisation changed the Phillips curve? Firm-level evidence on the effect of activity on prices,"
Temi di discussione (Economic working papers)
676, Bank of Italy, Economic Research and International Relations Area.
- Gaiotti, Eugenio, 2008. "Has globalisation changed the Phillips curve? Firm-level evidence on the effect of activity on prices," MPRA Paper 8389, University Library of Munich, Germany.
- P. Butzen & W. Melyn & H. Zimmer, 2007. "Recent commodity price developments : causes and effects," Economic Review, National Bank of Belgium, issue II, pages 29-45, September.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.