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Can Central Banks Successfully Lean against Global Headwinds?

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  • Malte Rieth

Abstract

Despite expansionary central bank action, inflation remains low in the euro area. How much can we expect from the additional stimulus in face of anaemic global growth and declining oil prices? More generally, have central banks lost the ability to steer inflation in a globalised world where external factors have powerful effects on domestic inflation? This roundup summarises the evidence in the literature and concludes that central banks retain influence on domestic inflation.

Suggested Citation

  • Malte Rieth, 2015. "Can Central Banks Successfully Lean against Global Headwinds?," DIW Roundup: Politik im Fokus 88, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwrup:88en
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    File URL: https://www.diw.de/documents/publikationen/73/diw_01.c.523058.de/DIW_Roundup_88_en.pdf
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    References listed on IDEAS

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    1. Auer, Raphael & Fischer, Andreas M., 2010. "The effect of low-wage import competition on U.S. inflationary pressure," Journal of Monetary Economics, Elsevier, vol. 57(4), pages 491-503, May.
    2. Alessandro Calza, 2009. "Globalization, Domestic Inflation and Global Output Gaps: Evidence from the Euro Area," International Finance, Wiley Blackwell, vol. 12(3), pages 301-320, December.
    3. Auer, Raphael A. & Degen, Kathrin & Fischer, Andreas M., 2013. "Low-wage import competition, inflationary pressure, and industry dynamics in Europe," European Economic Review, Elsevier, vol. 59(C), pages 141-166.
    4. Auer, Raphael & Fischer, Andreas M., 2010. "The effect of low-wage import competition on U.S. inflationary pressure," Journal of Monetary Economics, Elsevier, vol. 57(4), pages 491-503, May.
    5. Lutz Kilian, 2009. "Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market," American Economic Review, American Economic Association, vol. 99(3), pages 1053-1069, June.
    6. Olivier J. Blanchard & Jordi Galí, 2007. "The Macroeconomic Effects of Oil Price Shocks: Why Are the 2000s so Different from the 1970s?," NBER Chapters, in: International Dimensions of Monetary Policy, pages 373-421, National Bureau of Economic Research, Inc.
    7. Antonia López-Villavicencio & Sophie Saglio, 2014. "Is Globalization Weakening the Inflation–Output Relationship?," Review of International Economics, Wiley Blackwell, vol. 22(4), pages 744-758, September.
    8. Francesco Bianchi & Andrea Civelli, 2015. "Globalization and Inflation: Evidence from a Time Varying VAR," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(2), pages 406-433, April.
    9. Laurence M. Ball, 2006. "Has Globalization Changed Inflation?," NBER Working Papers 12687, National Bureau of Economic Research, Inc.
    10. Geoffrey M. B. Tootell, 1998. "Globalization and U.S. inflation," New England Economic Review, Federal Reserve Bank of Boston, issue Jul, pages 21-33.
    11. Christiane Baumeister & Gert Peersman, 2013. "Time-Varying Effects of Oil Supply Shocks on the US Economy," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(4), pages 1-28, October.
    12. Olivier J. Blanchard & Jordi Gali, 2007. "The Macroeconomic Effects of Oil Shocks: Why are the 2000s So Different from the 1970s?," NBER Working Papers 13368, National Bureau of Economic Research, Inc.
    13. Gamber, Edward N & Hung, Juann H, 2001. "Has the Rise in Globalization Reduced U.S. Inflation in the 1990s?," Economic Inquiry, Western Economic Association International, vol. 39(1), pages 58-73, January.
    14. Christian Dreger & Yanqun Zhang, 2011. "The Chinese Impact on GDP Growth and Inflation in the Industrial Countries," Discussion Papers of DIW Berlin 1151, DIW Berlin, German Institute for Economic Research.
    15. Jane Ihrig & Steven B. Kamin & Deborah Lindner & Jaime Marquez, 2010. "Some Simple Tests of the Globalization and Inflation Hypothesis," International Finance, Wiley Blackwell, vol. 13(3), pages 343-375, December.
    16. Nigel Pain & Isabell Koske & Marte Sollie, 2006. "Globalisation and Inflation in the OECD Economies," OECD Economics Department Working Papers 524, OECD Publishing.
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    Cited by:

    1. Gregor Bäurle & Matthias Gubler & Diego R. Känzig, 2021. "International Inflation Spillovers: The Role of Different Shocks," International Journal of Central Banking, International Journal of Central Banking, vol. 17(1), pages 191-230, March.

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