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Globalization, Pass-Through and Inflation Dynamic

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  • Pierpaolo Benigno

    (Professor, LUISS Guido Carli and EIEF (E-mail: pbenigno@luiss.it))

  • Ester Faia

    (Professor, Goethe University Frankfurt, Kiel IfW and CEPREMAP (E-mail: faia@wiwi.uni-frankfurt.de))

Abstract

An important aspect of the globalization process is the increase in interdependence among countries through the deepening of trade linkages. This process should increase competition in each destination market and change the pricing behavior of firms. We present an extension of Dornbusch (1987)fs model to analyze the extent to which globalization, interpreted as an increase in the number of foreign products in each destination market, modifies the slope and the position of the New-Keynesian aggregate-supply equation and, at the same time, affects the degree of exchange rate pass-through. We provide empirical evidence that supports the results of our model.

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Bibliographic Info

Paper provided by Institute for Monetary and Economic Studies, Bank of Japan in its series IMES Discussion Paper Series with number 10-E-17.

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Date of creation: Jul 2010
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Handle: RePEc:ime:imedps:10-e-17

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Keywords: AS equations; Oligopolistic Competition; Inflation Dynamic;

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Citations

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Cited by:
  1. Raphael Schoenle & Raphael Auer, 2012. "Market Structure and Pass-Through," 2012 Meeting Papers 61, Society for Economic Dynamics.
  2. Raphael S. Schoenle & Raphael A. Auer, 2013. "Market Structure and Exchange Rate Pass-Through," Working Papers 62, Brandeis University, Department of Economics and International Businesss School.
  3. Anna Watson, 2010. "The Impact of Trade Integration and Competition on Real and Nominal Price Rigidities: Insights from a New-Keynesian DSGE Model," DEGIT Conference Papers c015_061, DEGIT, Dynamics, Economic Growth, and International Trade.
  4. Shigenori Shiratsuka & Wataru Takahashi & Yuki Teranishi & Kozo Ueda, 2010. "Future of Central Banking under Globalization: Summary of the 2010 International Conference Organized by the Institute for Monetary and Economic Studies of the Bank of Japan," IMES Discussion Paper Series 10-E-21, Institute for Monetary and Economic Studies, Bank of Japan.
  5. Andreas Bachmann, 2012. "Exchange rate pass-through to various price indices: empirical estimation using vector error correction models," Diskussionsschriften dp1205, Universitaet Bern, Departement Volkswirtschaft.

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