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Does globalisation discipline monetary policymakers?

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  • Cavelaars, Paul

Abstract

This paper analyses globalisation using a small general equilibrium model. It concludes that whether increased openness (a reduction in the costs of international trade) helps to discipline monetary policy in large open economies depends on the type of trade costs. Moreover, to the extent that globalisation induces stronger competition in the goods market, this may also have an adverse effect on monetary policy discipline. The latter is due to international expenditure switching, which becomes a more forceful channel as competition intensifies. Thus, the answer to the question in the title is not necessarily affirmative.

Suggested Citation

  • Cavelaars, Paul, 2009. "Does globalisation discipline monetary policymakers?," Journal of International Money and Finance, Elsevier, vol. 28(3), pages 392-405, April.
  • Handle: RePEc:eee:jimfin:v:28:y:2009:i:3:p:392-405
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    References listed on IDEAS

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    Cited by:

    1. Joseph Daniels & Sandeep Mazumder & David VanHoose, 2015. "Implications of Globalization for the Output-inflation Relationship: an Assessment," Open Economies Review, Springer, vol. 26(1), pages 39-60, February.
    2. Watson, Anna, 2016. "Trade openness and inflation: The role of real and nominal price rigidities," Journal of International Money and Finance, Elsevier, vol. 64(C), pages 137-169.
    3. Daniels, Joseph P. & VanHoose, David D., 2013. "Exchange-rate pass through, openness, and the sacrifice ratio," Journal of International Money and Finance, Elsevier, vol. 36(C), pages 131-150.
    4. Andrea Vaona, 2015. "The price-price Phillips curve in small open economies and monetary unions: theory and empirics," International Economics and Economic Policy, Springer, vol. 12(2), pages 281-307, June.

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