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Globalization, Import Prices and Producer Prices in Austria

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Abstract

The growing theoretical and empirical literature suggests that globalization may have reduced inflation, particularly in high-income countries. Austria’s integration in the world economy has made a quantum leap over the past decade. Has this development dampened inflation in Austria? This paper first offers a broad overview of six channels through which one could expect globalization to reduce inflation. Then, two specific channels are investigated empirically for Austria. First, the effects from the increasing share of imports from low-cost countries on import prices are estimated. It is found that overall import prices were slightly dampened by the rising, and meanwhile substantial, share of imports from the new EU Member States. By contrast, China and other emerging economies play a negligible role for Austrian import price developments. Second, the effect of global competition on producer prices in Austria is studied. It is found that globalization has moderately dampened relative producer prices in the Austrian manufacturing sector, while increases in labor productivity had a larger effect. A rationale for the rather modest globalization effects on import and producer price inflation in Austria is that the country’s foreign trade and FDI links are still – despite the surge of links with central and eastern European countries – mainly with other high-income European countries.:

Suggested Citation

  • 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.
  • Handle: RePEc:onb:oenbmp:y:2006:i:3:b:2
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    References listed on IDEAS

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    Cited by:

    1. Auer, Raphael A. & Degen, Kathrin & Fischer, Andreas M., 2013. "Low-wage import competition, inflationary pressure, and industry dynamics in Europe," European Economic Review, Elsevier, vol. 59(C), pages 141-166.
    2. Juan Carluccio & Erwan Gautier & Sophie Guilloux-Nefussi, 2018. "Dissecting the Impact of Imports from Low-Wage Countries on French Consumer Prices," Working papers 672, Banque de France.
    3. Alpaslan AKÇORAOĞLU, 2012. "Yeni Açık Ekonomi Makroiktisat Teorisi ve Para Politikasının Uluslararası Boyutları," Ekonomik Yaklasim, Ekonomik Yaklasim Association, vol. 23(85), pages 57-82.
    4. Ernest Gnan & Maria Teresa Valderrama, 2006. "Globalization, Inflation and Monetary Policy," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 4, pages 37-54.
    5. Jesús Cuaresma & Ernest Gnan, 2007. "The natural rate of interest: which concept? which estimation method? which policy conclusions?," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 29(4), pages 667-688.
    6. Robert Anderton & Alessandro Galesi & Marco Lombardi & Filippo di Mauro, 2010. "Key Elements of Global Inflation," RBA Annual Conference Volume,in: Renée Fry & Callum Jones & Christopher Kent (ed.), Inflation in an Era of Relative Price Shocks Reserve Bank of Australia.
    7. Robert Anderton & Paul Hiebert, "undated". "The Impact of Globalisation on the Euro Area Macroeconomy," Discussion Papers 09/14, University of Nottingham, GEP.
    8. Auer, Raphael & Degen, Kathrin & Fischer, Andreas M., 2010. "Globalization and inflation in Europe," Globalization and Monetary Policy Institute Working Paper 65, Federal Reserve Bank of Dallas.

    More about this item

    Keywords

    Globalization indicators; Import and producer prices; Inflation; Austria;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • F15 - International Economics - - Trade - - - Economic Integration

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