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Globalization and Disinflation: A Note

Author

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  • Razin, Assaf

Abstract

We analyse how globalization forces induce monetary authorities, guided in their policies by the welfare criterion of a representative household, to put greater emphasis on reducing the inflation rate than on narrowing the output gaps. Specifically, I demonstrate how the relative weight of the output gap term in a utility-based loss function shrinks when the economy is open to international trade in goods, and is integrated to the world capital markets.

Suggested Citation

  • Razin, Assaf, 2005. "Globalization and Disinflation: A Note," CEPR Discussion Papers 4826, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:4826
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    References listed on IDEAS

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    1. Assaf Razin & Chi-Wa Yuen, 2001. "The "New Keynesian" Phillips Curve: Closed Economy vs. Open Economy," NBER Working Papers 8313, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Marc Hofstetter, 2008. "Why Have So Many Disinflations Succeeded?," Contemporary Economic Policy, Western Economic Association International, vol. 26(1), pages 89-106, January.
    2. Auer, Raphael & Fischer, Andreas M., 2010. "The effect of low-wage import competition on U.S. inflationary pressure," Journal of Monetary Economics, Elsevier, vol. 57(4), pages 491-503, May.
    3. Sánchez, Marcelo, 2006. "Implications of monetary union for catching-up member states," Working Paper Series 630, European Central Bank.
    4. International Monetary Fund, 2010. "Commodity Prices and Inflation in the Middle East, North Africa, and Central Asia," IMF Working Papers 10/135, International Monetary Fund.
    5. Luke B Willard & Tarhan Feyzioglu, 2006. "Does Inflation in China Affect the United States and Japan?," IMF Working Papers 06/36, International Monetary Fund.
    6. G. Lim & Paul Mcnelis, 2006. "Central Bank Learning and Taylor Rules with Sticky Import Prices," Computational Economics, Springer;Society for Computational Economics, vol. 28(2), pages 155-175, September.
    7. Christopher Bowdler & Adeel Malik, 2005. "Openness and inflation volatility: Cross-country evidence," Economics Papers 2005-W14, Economics Group, Nuffield College, University of Oxford.
    8. 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.
    9. Martin T. Bohl & David G. Mayes & Pierre L. Siklos, 2011. "The Quality Of Monetary Policy And Inflation Performance: Globalization And Its Aftermath," Manchester School, University of Manchester, vol. 79(s1), pages 617-645, June.
    10. Céline Allard, 2007. "Inflation in Poland; How Much Can Globalization Explain?," IMF Working Papers 07/41, International Monetary Fund.

    More about this item

    Keywords

    aggregate supply; captial market openness; inflation-output tradeoff; trade openness;

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • F02 - International Economics - - General - - - International Economic Order and Integration

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