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Petrodollars, Globalization And U.S. Inflation

Author

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  • Tahereh Alavi Hojjat
  • Bhagyavati

Abstract

This paper evaluates the theoretical and empirical evidence that bears on the question of whether globalization and petrodollars recycling contributed to significant changes in inflation performance in the U.S. We assume that the impact of globalization can be direct and indirect. Direct impact is through the cheaper imported goods to the U.S. as a component of Consumer Price Index. Indirect impacts are through the effects on wage, cost of capital, and inflow of funds including the petrodollars and the impacts of price of competing goods. Data for analysis are compiled from the Department of Commerce and the International Monetary Fund (IMF) for period of 1990-2005. Our findings suggest that, under current circumstances, globalization could have only a modest disinflationary effect on U.S. inflation. However, if some fundamental factors, such as these countries’ exchange rates, demand and wage change (i.e. increase), then the downward pressure on U.S. inflation will be decreased. The flow of workers from emerging economies to competitive labor markets will slow down. The downward pressure on rich-world wages and prices will lift, and globalization will become an inflationary force instead.

Suggested Citation

  • Tahereh Alavi Hojjat & Bhagyavati, 2009. "Petrodollars, Globalization And U.S. Inflation," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 3(2), pages 49-63.
  • Handle: RePEc:ibf:gjbres:v:3:y:2009:i:2:p:49-63
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    Citations

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    Cited by:

    1. Dassanayake, Geekiyanage Disela Malinga & Kumar, Amit, 2012. "Techno-economic assessment of triticale straw for power generation," Applied Energy, Elsevier, vol. 98(C), pages 236-245.
    2. Richter, Alexander W., 2015. "Finite lifetimes, long-term debt and the fiscal limit," Journal of Economic Dynamics and Control, Elsevier, vol. 51(C), pages 180-203.
    3. Zhang, Jing & Liang, Xiong-jian, 2012. "Promoting green ICT in China: A framework based on innovation system approaches," Telecommunications Policy, Elsevier, vol. 36(10), pages 997-1013.
    4. Michel Casteigts, 2010. "Mythes Métropolitains Et Territorialités Urbaines Dans Le Processus De Globalisation : Un Repérage Critique," Post-Print halshs-01528113, HAL.
    5. Sokona, Youba & Mulugetta, Yacob & Gujba, Haruna, 2012. "Widening energy access in Africa: Towards energy transition," Energy Policy, Elsevier, vol. 47(S1), pages 3-10.
    6. Demont, Matty & Fiamohe, Rose & Kinkpé, A. Thierry, 2017. "Comparative Advantage in Demand and the Development of Rice Value Chains in West Africa," World Development, Elsevier, vol. 96(C), pages 578-590.
    7. Alex Bowen, 2014. "Green growth," Chapters, in: Giles Atkinson & Simon Dietz & Eric Neumayer & Matthew Agarwala (ed.), Handbook of Sustainable Development, chapter 15, pages 237-251, Edward Elgar Publishing.

    More about this item

    Keywords

    globalization; inflation; Consumer Price Index; petrodollars; International Monetary Fund;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E29 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Other
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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