Globalization, Domestic Inflation and Global Output Gaps: Evidence from the Euro Area
This paper tests whether the proposition that globalization has led to greater sensitivity of domestic inflation to the global output gap (the 'global output gap hypothesis') holds for the euro area. The empirical analysis uses quarterly data over the period 1979-2003. Measures of the global output gap using two different weighting schemes (based on purchasing power parities and trade data) are considered. We find limited evidence that global capacity constraints have explanatory power for domestic consumer price inflation in the euro area. Based on these findings, the prescription that central banks should specifically react to developments in global output gaps does not seem to be justified for the euro area. Copyright 2009 Blackwell Publishing Ltd
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 12 (2009)
Issue (Month): 3 (December)
|Contact details of provider:|| Web page: http://www.blackwellpublishing.com/journal.asp?ref=1367-0271|
|Order Information:||Web: http://www.blackwellpublishing.com/subs.asp?ref=1367-0271|