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Is Globalization Weakening the Inflation–Output Relationship?

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  • Antonia López-Villavicencio
  • Sophie Saglio

Abstract

This paper investigates whether trade and financial openness has weakened the inflation–output trade-off and caused a shift in the preferences of monetary authorities. Based on the backward-looking Phillips curve and a Taylor-type interest rate rule, our results for France, the UK and the USA for the 1970–2012 period do not provide support for the relevance of globalization in making inflation less responsive to output expansions. Moreover, the change of preferences of Central Banks towards growth-oriented objectives is neither due to higher trade nor to financial globalization.

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  • Antonia López-Villavicencio & Sophie Saglio, 2014. "Is Globalization Weakening the Inflation–Output Relationship?," Review of International Economics, Wiley Blackwell, vol. 22(4), pages 744-758, September.
    • Handle: RePEc:bla:reviec:v:22:y:2014:i:4:p:744-758
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    5. Malte Rieth, 2015. "Can Central Banks Successfully Lean against Global Headwinds?," DIW Roundup: Politik im Fokus 88, DIW Berlin, German Institute for Economic Research.

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