Globalization,the Output-Inflation Tradeoff, and Inflation

Arbeitspapier

This paper provides a comprehensive assessment of the relation between inflation and globalization, measured in terms of trade and financial openness. Using a large crosssection of 91 countries covering the period 1985-2004, we establish two main empirical regularities. Both higher trade and financial openness i) reduce central bank?s inflation bias,yielding lower average inflation, and ii) are associated with a larger output-inflation tradeoff. This evidence is at odds with the standard Barro-Gordon framework, which would require globalization to have a negative effect on the output-inflation tradeoff to yield lower equilibrium inflation, but it is consistent with a recent strand of new Keynesian models emphasizing the role of imperfect competition and wage rigidities. Moreover, our findings do not hold up for the OECD subsample, which suggests that a group of highly developed countries has been successful in creating an institutional framework for central banks that eliminates distortions due to the time inconsistency problem.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: FIW Working Paper ; No. 10

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Central Banks and Their Policies ; Open Economy Macroeconomics ; Trade: General ; International Finance: General
• Thema: Globalization ; Trade ; Financial Openness ; Inflation ; Output Inflation Tradeoff

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Badinger, Harald
• Ereignis: Veröffentlichung
• (wer): FIW - Research Centre International Economics
• (wo): Vienna
• (wann): 2008

Weitere Informationen

• Handle: http://hdl.handle.net/10419/121011
• Letzte Aktualisierung: 10.03.2025, 11:41 MEZ