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Financial Globalization and Monetary Policy

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  • Helmut Wagner
  • Wolfram Berger

Abstract

Recently, it has often been argued that globalization eases the job of central banks as it helps to tame inflation. This is used to argue that central banks (particularly the ECB, referring to the objectives as laid down in the EU-Treaty) could or should reduce their efforts in the fight against inflation in favour of supporting the general economic policies of the governments. This paper is concerned critically with this argument. It points to the structural changes associated with globalization and to the corresponding increase in uncertainty by which the central banks are affected. As an example of this, the increase in financial volatility is analysed and explained as the result of optimal portfolio allocation, and its implications for monetary policy are discussed.

Suggested Citation

  • Helmut Wagner & Wolfram Berger, 2003. "Financial Globalization and Monetary Policy," DNB Staff Reports (discontinued) 95, Netherlands Central Bank.
  • Handle: RePEc:dnb:staffs:95
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    File URL: https://www.dnb.nl/binaries/sr095_tcm46-146872.pdf
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    References listed on IDEAS

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    Cited by:

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    2. Wagner, Helmut & Kißmer, Friedrich & Funke, Norbert, 2006. "International Lessons for the Property Price Boom in South Africa," Proceedings of the German Development Economics Conference, Berlin 2006 27, Verein für Socialpolitik, Research Committee Development Economics.
    3. Helmut Wagner, 2005. "Globalization and financial instability: Challenges for exchange rate and monetary policy," International Journal of Social Economics, Emerald Group Publishing, vol. 32(7), pages 616-638, July.
    4. Bank for International Settlements, 2005. "Globalisation and monetary policy in emerging markets," BIS Papers, Bank for International Settlements, number 23, June.
    5. Norbert Funke & Friedrich Kißmer & Helmut Wagner, 2006. "International Lessons For The Property Price Boom In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 74(2), pages 205-214, June.
    6. Latifah Merican Cheong, 2005. "Globalisation and the operation of monetary policy in Malaysia," BIS Papers chapters, in: Bank for International Settlements (ed.), Globalisation and monetary policy in emerging markets, volume 23, pages 209-15, Bank for International Settlements.
    7. Ahmed, Ovais & Mashkoor, Aasim, 2016. "The wrong impact of Fiscal Imbalance on economic growth and Monetary Policy consequences (A case of Pakistan)," MPRA Paper 69752, University Library of Munich, Germany.

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    More about this item

    Keywords

    globalization; inflation; volatility; capital flows; forecast error; asset prices;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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