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Globalisation effect on inflation in the Great Moderation era: New evidence from G10 countries

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  • Qin, Duo
  • He, Xinhua

Abstract

Dynamic econometric models are built individually for ten countries from G10 during the Great Moderation period, with the aim of analysing counterfactually the globalisation effect on inflation. The main findings are (i) the effect is highly heterogeneous from country to country; (ii) increases in trade openness could be either inflationary or deflationary whereas increased imports from low-cost emerging-market economies are mostly deflationary; and (iii) there is almost no direct globalisation impact as far as inflation persistence is concerned while the impact on inflation variability can be positive as well as negative. Overall, globalisation is found to have contributed positively to lowering rather than stabilising inflation during the Great Moderation era.

Suggested Citation

  • Qin, Duo & He, Xinhua, 2013. "Globalisation effect on inflation in the Great Moderation era: New evidence from G10 countries," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 7, pages 1-32.
  • Handle: RePEc:zbw:ifweej:201325
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    More about this item

    Keywords

    inflation dynamics; globalisation;

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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