The Quality of Monetary Policy and Inflation Performance: Globalization and its Aftermath

Posted: 6 Sep 2009

See all articles by Pierre L. Siklos

Pierre L. Siklos

Wilfrid Laurier University - School of Business & Economics; Balsillie school of international affairs

Martin T. Bohl

University of Muenster

David G. Mayes

University of Auckland Business School (Deceased)

Multiple version iconThere are 2 versions of this paper

Date Written: June 30, 2009

Abstract

With a few unfortunate exceptions the last three decades has seen reductions in inflation round the world to the point that many would argue that further improvements in price stability would offer only limited welfare gains. This experience is the result of many factors, some of which are country-specific. In this paper we seek to isolate one of the factors, namely, the improvement in the quality of monetary policy. There are two novel aspects to the study. First, we essentially estimate a gravity like model. Second, we propose generally a more exhaustive analysis of the potential role of a large number of institutional factors than has heretofore been done to date. Briefly, we find that institutional factors play a role in explaining inflation relative to the US experience, which is used as the benchmark. Nevertheless, any reduction in inflation stemming from greater central bank autonomy is a feature of the 1980s and early 1990s. Thereafter, central banks in the OECD look very much alike.

Keywords: globalization, inflation differentials, monetary policy strategy, institutional change

JEL Classification: E42, E58, C33

Suggested Citation

Siklos, Pierre L. and Bohl, Martin T. and Mayes, David G., The Quality of Monetary Policy and Inflation Performance: Globalization and its Aftermath (June 30, 2009). Available at SSRN: https://ssrn.com/abstract=1468931

Pierre L. Siklos (Contact Author)

Wilfrid Laurier University - School of Business & Economics ( email )

Department of Economics
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Waterloo, Ontario N2L 3C5
Canada
519-884-0710 Ext.. 3491 (Phone)

HOME PAGE: http://pierrelsiklos.com

Balsillie school of international affairs ( email )

67 Erb Street West
Waterloo, ON N2L 6C2
Canada

Martin T. Bohl

University of Muenster ( email )

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D-48149 Muenster, D-48149
Germany

David G. Mayes

University of Auckland Business School (Deceased)

12 Grafton Rd
Private Bag 92019
Auckland, 1010
New Zealand

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