Advanced Search
MyIDEAS: Login to save this article or follow this journal

Globalization, Inflation and Monetary Policy

Contents:

Author Info

Abstract

Following up on Glatzer, Gnan and Valderrama (2006), we investigate two further channels through which globalization may have dampened inflation in the euro area: first, changed incentives for policymakers; second, global demand and supply conditions. Our empirical evidence shows that the domestic output gap seems to have lost its influence on inflation in the euro area; however, we cannot confirm that euro area inflation is instead significantly influenced by the global output gap. Therefore and because of daunting measurement problems, we caution against attaching undue weight to global output gap developments in central banks’ reaction functions. The flattening of the euro area Phillips curve – together with weakened monetary policy control over inflation due to increasing global long-term interest links and heightened uncertainty for policymakers due to globalization – calls for the stabilization of inflation expectations as a primary goal for monetary policy. Central banks should not rely on the inflation-dampening effects of globalization to last indefinitely: Supply bottlenecks in energy and raw materials, a shift in emerging economies’ savings-investment balance, as well as protectionist pressure may put an end to these effects.

Download Info

If 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.
File URL: http://www.oenb.at/dms/oenb/Publikationen/Volkswirtschaft/Monetary-Policy-and-the-Economy/2006/Monetary-Policy-and-the-Economy-Q4-06/chapters/mop_2006_4_03_tcm16-52024.pdf
Download Restriction: no

Bibliographic Info

Article provided by Oesterreichische Nationalbank (Austrian Central Bank) in its journal Monetary Policy & the Economy.

Volume (Year): (2006)
Issue (Month): 4 ()
Pages: 37–54

as in new window
Handle: RePEc:onb:oenbmp:y:2006:i:4:b:3

Contact details of provider:
Postal: P.O. Box 61, A-1011 Vienna, Austria
Phone: +43/1/404 20 7405
Fax: +43/1/404 20 7499
Email:
Web page: http://www.oenb.at
More information through EDIRC

Order Information:
Postal: Oesterreichische Nationalbank, Documentation Management and Communications Services, Otto-Wagner Platz 3, A-1090 Vienna, Austria
Email:

Related research

Keywords: Globalization; Inflation; Monetary policy;

Find related papers by JEL classification:

References

References listed on IDEAS
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.:
as in new window
  1. Robert G. King, 2005. "Comment on "Globalization and Disinflation: The Efficiency Channel"," NBER Chapters, National Bureau of Economic Research, Inc, in: NBER International Seminar on Macroeconomics 2005, pages 193-199 National Bureau of Economic Research, Inc.
  2. Paul Cavelaars, 2005. "Globalisation and Monetary Policy," DNB Working Papers, Netherlands Central Bank, Research Department 048, Netherlands Central Bank, Research Department.
  3. John B. Taylor, 1998. "An Historical Analysis of Monetary Policy Rules," NBER Working Papers 6768, National Bureau of Economic Research, Inc.
  4. Gabriele Galati & William R. Melick, 2006. "The evolving inflation process: an overview," BIS Working Papers, Bank for International Settlements 196, Bank for International Settlements.
  5. Fabio Canova & Luca Gambetti & Evi Pappa, 2006. "The structural dynamics of output growth and inflation: some international evidence," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 971, Department of Economics and Business, Universitat Pompeu Fabra, revised Aug 2006.
  6. Cristina T. Terra, 1998. "Openness And Inflation: A New Assessment," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 113(2), pages 641-648, May.
  7. Matteo Ciccarelli & Benoît Mojon, 2005. "Global Inflation," Working Papers Central Bank of Chile, Central Bank of Chile 357, Central Bank of Chile.
  8. Diego Winkelried & Marco Vega, 2004. "How Does Global Disinflation Drag Inflation in Small Open Economies?," Econometric Society 2004 Latin American Meetings, Econometric Society 76, Econometric Society.
  9. Richard Clarida & Jordi Galí & Mark Gertler, 1997. "Monetary policy rules and macroeconomic stability: Evidence and some theory," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 350, Department of Economics and Business, Universitat Pompeu Fabra, revised May 1999.
  10. Loungani, Prakash & Razin, Assaf, 2005. "Globalization and Disinflation: The Efficiency Channel," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4895, C.E.P.R. Discussion Papers.
  11. Haroon Mumtaz & Paolo Surico, 2012. "Evolving International Inflation Dynamics: World And Country-Specific Factors," Journal of the European Economic Association, European Economic Association, European Economic Association, vol. 10(4), pages 716-734, 08.
  12. Assaf Razin & Prakash Loungani, 2005. "Globalization and Inflation-Output Tradeoffs," NBER Working Papers 11641, National Bureau of Economic Research, Inc.
  13. Jeremy Rudd & Karl Whelan, 2005. "Modelling inflation dynamics: a critical review of recent research," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2005-66, Board of Governors of the Federal Reserve System (U.S.).
  14. Troy Matheson, 2006. "Phillips curve forecasting in a small open economy," Reserve Bank of New Zealand Discussion Paper Series DP2006/01, Reserve Bank of New Zealand.
  15. Assaf Razin & Prakash Loungani, 2005. "Globalization and Equilibrium Inflation-Output Tradeoffs," NBER Chapters, National Bureau of Economic Research, Inc, in: NBER International Seminar on Macroeconomics 2005, pages 171-192 National Bureau of Economic Research, Inc.
  16. David Romer, 1998. "A New Assessment Of Openness And Inflation: Reply," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 113(2), pages 649-652, May.
  17. Aksoy, Yunus & Orphanides, Athanasios & Small, David & Wieland, Volker & Wilcox, David, 2003. "A Quantitative Exploration of the Opportunistic Approach to Disinflation," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4073, C.E.P.R. Discussion Papers.
  18. David Romer, 1991. "Openness and Inflation: Theory and Evidence," NBER Working Papers 3936, National Bureau of Economic Research, Inc.
  19. Ernst Glatzer & Ernest Gnan & Maria Teresa Valderrama, 2006. "Globalization, Import Prices and Producer Prices in Austria," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), Oesterreichische Nationalbank (Austrian Central Bank), issue 3, pages 24–43.
  20. Orphanides, Athanasios & Wilcox, David W, 2002. "The Opportunistic Approach to Disinflation," International Finance, Wiley Blackwell, Wiley Blackwell, vol. 5(1), pages 47-71, Spring.
  21. Chen, Natalie & Imbs, Jean & Scott, Andrew, 2004. "Competition, Globalization and the Decline of Inflation," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4695, C.E.P.R. Discussion Papers.
  22. William C. Gruben & Darryl McLeod, 2003. "The openness-inflation puzzle revisited," Center for Latin America Working Papers, Federal Reserve Bank of Dallas 0203, Federal Reserve Bank of Dallas.
  23. Athanasios Orphanides, 2002. "Monetary policy rules and the Great Inflation," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2002-8, Board of Governors of the Federal Reserve System (U.S.).
  24. Paul Turner, 1997. "The Phillips curve, parameter instability and the Lucas critique," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 29(1), pages 7-10.
  25. Geoffrey M.B. Tootell, 1998. "Globalization and U.S. inflation," New England Economic Review, Federal Reserve Bank of Boston, Federal Reserve Bank of Boston, issue Jul, pages 21-33.
  26. Kenneth D. West, 2005. "Comment on "Globalization and Disinflation: The Efficiency Channel"," NBER Chapters, National Bureau of Economic Research, Inc, in: NBER International Seminar on Macroeconomics 2005, pages 200-203 National Bureau of Economic Research, Inc.
  27. Helmut Wagner, 2002. "Implications of Globalization for Monetary Policy," SUERF Studies, SUERF - The European Money and Finance Forum, SUERF - The European Money and Finance Forum, number 17 edited by Morten Balling, July.
  28. Lane, Philip R., 1997. "Inflation in open economies," Journal of International Economics, Elsevier, Elsevier, vol. 42(3-4), pages 327-347, May.
  29. Markus Arpa & Jesus Crespo Cuaresma & Ernest Gnan & Maria Antoinette Silgoner, 2006. "Oil Price Shock, Energy Prices and Inflation – A Comparison of Austria and the EU," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 53–77.
  30. Shang-Jin Wei & Irina Tytell, 2004. "Does Financial Globalization Induce Better Macroeconomic Policies?," IMF Working Papers, International Monetary Fund 04/84, International Monetary Fund.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Çiçek, Serkan, 2012. "Globalization and flattening of Phillips Curve in Turkey between 1987 and 2007," Economic Modelling, Elsevier, Elsevier, vol. 29(5), pages 1655-1661.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:onb:oenbmp:y:2006:i:4:b:3. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Claudia Kwapil).

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.