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U.K. Inflation and Relative Prices over the Last Decade; How Important was Globalization?

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  • Benjamin L Hunt

Abstract

In this paper, the IMF's new Global Economy Model (GEM) is used to estimate the relative importance of a number of factors argued to explain the differences in the trends in core inflation and relative prices in the United Kingdom, the Euro Area and the United States. The simulation results indicate that while the direct effect of globalization has had a larger effect in the United Kingdom than in either the United States or the Euro Area, it explains only a portion of the developments and U.K. specific factors played an important role.

Suggested Citation

  • Benjamin L Hunt, 2007. "U.K. Inflation and Relative Prices over the Last Decade; How Important was Globalization?," IMF Working Papers 07/208, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:07/208
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    References listed on IDEAS

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    1. Baumol, William J, 1972. "Macroeconomics of Unbalanced Growth: Reply," American Economic Review, American Economic Association, vol. 62(1), pages 150-150, March.
    2. David Bowman, 2003. "Market power and inflation," International Finance Discussion Papers 783, Board of Governors of the Federal Reserve System (U.S.).
    3. Smets, Frank & Wouters, Raf, 2002. "An estimated stochastic dynamic general equilibrium model of the euro area," Working Paper Series 0171, European Central Bank.
    4. Todd E. Clark, 2004. "An evaluation of the decline in goods inflation," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 19-51.
    5. De Gregorio, Jose & Giovannini, Alberto & Wolf, Holger C., 1994. "International evidence on tradables and nontradables inflation," European Economic Review, Elsevier, vol. 38(6), pages 1225-1244, June.
    6. Chen, Natalie & Imbs, Jean & Scott, Andrew, 2004. "Competition, Globalization and the Decline of Inflation," CEPR Discussion Papers 4695, C.E.P.R. Discussion Papers.
    7. Laxton, Douglas & Pesenti, Paolo, 2003. "Monetary rules for small, open, emerging economies," Journal of Monetary Economics, Elsevier, vol. 50(5), pages 1109-1146, July.
    8. Laurence M. Ball, 2006. "Has Globalization Changed Inflation?," NBER Working Papers 12687, National Bureau of Economic Research, Inc.
    9. Ravi Balakrishnan & Sam Ouliaris, 2006. "U.S. Inflation Dynamics; What Drives Them Over Different Frequencies?," IMF Working Papers 06/159, International Monetary Fund.
    10. David Brauer, 1993. "Why do services prices rise more rapidly than goods prices?," Research Paper 9330, Federal Reserve Bank of New York.
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    Citations

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    Cited by:

    1. Andersson, Fredrik N. G., 2008. "Core Inflation - Why the Federal Reserve Got it Wrong," Working Papers 2008:19, Lund University, Department of Economics.
    2. International Monetary Fund, 2008. "New Zealand; Selected Issues," IMF Staff Country Reports 08/164, International Monetary Fund.
    3. Benjamin L Hunt, 2009. "The Declining Importance of Tradable Goods Manufacturing in Australia and New Zealand; How Much Can Growth Theory Explain?," IMF Working Papers 09/16, International Monetary Fund.

    More about this item

    Keywords

    Economic models; Inflation; Globalization; Prices; United Kingdom; relative prices; relative price; price inflation; rational expectations;

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