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Some Preliminary Evidence on the Globalization-Inflation Nexus

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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

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    Cited by:

    1. 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.
    2. Simone Auer, 2023. "Financial globalization and monetary transmission," Review of International Economics, Wiley Blackwell, vol. 31(2), pages 721-760, May.
    3. Mark A. Wynne, 2012. "Five Years of Research on Globalization and Monetary Policy: What Have We Learned?," Annual Report, Globalization and Monetary Policy Institute, Federal Reserve Bank of Dallas, pages 2-17.
    4. Mark A. Wynne, 2008. "First steps: developing a research agenda on globalization and monetary policy," Annual Report, Globalization and Monetary Policy Institute, Federal Reserve Bank of Dallas, pages 4-13.
    5. Sandeep Mazumder, 2017. "The Impact of Globalization on Inflation in Developing Countries," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 42(3), pages 41-60, September.

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    More about this item

    Keywords

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

    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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