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Financial Globalization and Monetary Policy

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Author Info
Helmut Wagner
Wolfram Berger

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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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Publisher 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
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Handle: RePEc:dnb:staffs:95

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

Find related papers by JEL classification:
F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
F34 - International Economics - - International Finance - - - International Lending and Debt Problems
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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References listed on IDEAS
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Full references

Cited by:
(explanations, 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.)

  1. 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), issue 3, pages 24-43, November . [Downloadable!]
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