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Financial Globalization and Monetary Policy

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  • Helmut Wagner
  • Wolfram Berger

Abstract

Recently, it has often been argued that globalization eases the job of central banks as it helps to tame inflation. This is used to argue that central banks (particularly the ECB, referring to the objectives as laid down in the EU-Treaty) could or should reduce their efforts in the fight against inflation in favour of supporting the general economic policies of the governments. This paper is concerned critically with this argument. It points to the structural changes associated with globalization and to the corresponding increase in uncertainty by which the central banks are affected. As an example of this, the increase in financial volatility is analysed and explained as the result of optimal portfolio allocation, and its implications for monetary policy are discussed.

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Bibliographic Info

Paper provided by Netherlands Central Bank in its series DNB Staff Reports (discontinued) with number 95.

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Length: 52 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:dnb:staffs:95

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Keywords: globalization; inflation; volatility; capital flows; forecast error; asset prices;

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References

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Citations

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Cited by:
  1. Meir Sokoler, 2005. "Globalisation and its effects on monetary policy: the case of Israel," BIS Papers chapters, in: Bank for International Settlements (ed.), Globalisation and monetary policy in emerging markets, volume 23, pages 176-85 Bank for International Settlements.
  2. Wagner, Helmut & Kißmer, Friedrich & Funke, Norbert, 2006. "International Lessons for the Property Price Boom in South Africa," Proceedings of the German Development Economics Conference, Berlin 2006 27, Verein für Socialpolitik, Research Committee Development Economics.
  3. Latifah Merican Cheong, 2005. "Globalisation and the operation of monetary policy in Malaysia," BIS Papers chapters, in: Bank for International Settlements (ed.), Globalisation and monetary policy in emerging markets, volume 23, pages 209-15 Bank for International Settlements.
  4. Bank for International Settlements, 2005. "Globalisation and monetary policy in emerging markets," BIS Papers, Bank for International Settlements, number 23, 8.

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