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Some Preliminary Evidence on the Globalization-Inflation Nexus

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  • Guilloux, S.
  • Kharroubi, E.

Abstract

This paper aims at evaluating the impact of globalization, if any, on inflation and the inflation process. We estimate standard Phillips curve equations on a panel of OECD countries over the last 25 years. We first show that the impact of commodity import price inflation on CPI inflation depends on the volume of commodity imports while the impact of non-commodity import price inflation is independent of the volume of non-commodity imports. Second, focusing on the role of intra-industry trade, we provide preliminary evidence that this variable can account (i) for the low pass-through of import price to consumer price and (ii) for the flattening of the Phillips curve, i.e. the lower sensitivity of inflation to the output gap.

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Bibliographic Info

Paper provided by Banque de France in its series Working papers with number 195.

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Length: 48 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:bfr:banfra:195

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Postal: Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS
Web page: http://www.banque-france.fr/
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Related research

Keywords: Inflation ; Globalization ; Phillips curve ; Intra-industry trade ; Contestability ; Import prices.;

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References

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  1. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
  2. Daniel Cohen, 2007. "Globalization and Its Enemies," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262532972, December.
  3. Gayle Allard, 2005. "Measuring job security over time: in search of a historical indicator for EPL," Working Papers Economia wp05-17, Instituto de Empresa, Area of Economic Environment.
  4. Gayle Allard, 2005. "Measuring The Changing Generosity Of Unemployment Benefits: Beyond Existing Indicators," Working Papers Economia wp05-18, Instituto de Empresa, Area of Economic Environment.
  5. Chen, Natalie & Imbs, Jean & Scott, Andrew, 2004. "Competition, Globalization and the Decline of Inflation," CEPR Discussion Papers 4695, C.E.P.R. Discussion Papers.
  6. Hoekman, Bernard & Hiau Looi Kee & Olarreaga, Marcelo, 2001. "Markups, entry regulation, and trade - Does country size matter?," Policy Research Working Paper Series 2662, The World Bank.
  7. Laurence M. Ball, 2006. "Has Globalization Changed Inflation?," NBER Working Papers 12687, National Bureau of Economic Research, Inc.
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Cited by:
  1. Simone Meier, 2013. "Financial globalization and monetary transmission," Globalization and Monetary Policy Institute Working Paper 145, Federal Reserve Bank of Dallas.

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