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Some Preliminary Evidence on the Globalization-Inflation Nexus

Author

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  • Guilloux, S.
  • Kharroubi, E.

Abstract

This paper aims at evaluating the impact of globalization, if any, on inflation and the inflation process. We estimate standard Phillips curve equations on a panel of OECD countries over the last 25 years. We first show that the impact of commodity import price inflation on CPI inflation depends on the volume of commodity imports while the impact of non-commodity import price inflation is independent of the volume of non-commodity imports. Second, focusing on the role of intra-industry trade, we provide preliminary evidence that this variable can account (i) for the low pass-through of import price to consumer price and (ii) for the flattening of the Phillips curve, i.e. the lower sensitivity of inflation to the output gap.

Suggested Citation

  • Guilloux, S. & Kharroubi, E., 2008. "Some Preliminary Evidence on the Globalization-Inflation Nexus," Working papers 195, Banque de France.
  • Handle: RePEc:bfr:banfra:195
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    References listed on IDEAS

    as
    1. Chen, Natalie & Imbs, Jean & Scott, Andrew, 2004. "Competition, Globalization and the Decline of Inflation," CEPR Discussion Papers 4695, C.E.P.R. Discussion Papers.
    2. Daniel Cohen, 2007. "Globalization and Its Enemies," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262532972, January.
    3. Hoekman, Bernard & Kee, Hiau Looi & Olarreaga, Marcelo, 2001. "Mark-ups, Entry Regulation and Trade: Does Country Size Matter?," CEPR Discussion Papers 2853, C.E.P.R. Discussion Papers.
    4. Gayle Allard, 2005. "Measuring The Changing Generosity Of Unemployment Benefits: Beyond Existing Indicators," Working Papers Economia wp05-18, Instituto de Empresa, Area of Economic Environment.
    5. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    6. Laurence M. Ball, 2006. "Has Globalization Changed Inflation?," NBER Working Papers 12687, National Bureau of Economic Research, Inc.
    7. Gayle Allard, 2005. "Measuring job security over time: in search of a historical indicator for EPL," Working Papers Economia wp05-17, Instituto de Empresa, Area of Economic Environment.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Wynne, Mark A., 2008. "First steps: developing a research agenda on globalization and monetary policy," Annual Report, Globalization and Monetary Policy Institute, Federal Reserve Bank of Dallas, Globalization and Monetary Policy Institute, pages 4-13.
    2. repec:jed:journl:v:42:y:2017:i:3:p:41-60 is not listed on IDEAS
    3. Simone Meier, 2013. "Financial Globalization and Monetary Transmission," Working Papers 2013-03, Swiss National Bank.
    4. Joseph P. Byrne & Fatima Kaneez & Alexandros Kontonikas, 2010. "Inflation and Globalisation: A Dynamic Factor Model with Stochastic Volatility," Working Papers 2010_09, Business School - Economics, University of Glasgow.
    5. repec:fip:feddgm:00014 is not listed on IDEAS

    More about this item

    Keywords

    Inflation ; Globalization ; Phillips curve ; Intra-industry trade ; Contestability ; Import prices.;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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