Globalisation and the Determinants of Domestic Inflation
William R. White
affiliation not provided to SSRN
BIS Working Paper No. 250
The remarkable stability of low domestic inflation in many countries requires explanation. In this paper, a number of competing hypotheses are evaluated on a stand-alone basis, and all are found to be inadequate. This includes the view that this outcome has been solely the result of more effective disinflationary monetary policies. However, a combination of these hypotheses (including a significant role for increased global competition) seems to provide a plausible explanation, not only for continuing low inflation, but also its coexistence with rapid growth and low real interest rates. Unfortunately, the analysis also leads to the conclusion that rising inflation, unwinding financial imbalances, or both, could easily follow the welcome stability seen to date.
Number of Pages in PDF File: 29
Keywords: inflation, monetary policy, globalisation, Phillips curve
JEL Classification: E31, E52, E58, F02, F41Accepted Paper Series
Date posted: April 16, 2008
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