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

54 Pages Posted: 28 Nov 2009

See all articles by Martin T. Bohl

Martin T. Bohl

University of Muenster

David G. Mayes

University of Auckland (Deceased)

Pierre L. Siklos

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

Multiple version iconThere are 2 versions of this paper

Date Written: November 25, 2009

Abstract

With a few unfortunate exceptions the last three decades have seen reductions in inflation around 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. Firstly, we essentially estimate a gravity-like model. Secondly, we propose generally a more exhaustive analysis of the potential role of a large number of institutional factors than has been done before. 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

Bohl, Martin T. and Mayes, David G. and Siklos, Pierre L., The Quality of Monetary Policy and Inflation Performance: Globalization and its Aftermath (November 25, 2009). Bank of Finland Research Discussion Paper No. 31/2009. Available at SSRN: https://ssrn.com/abstract=1513263 or http://dx.doi.org/10.2139/ssrn.1513263

Martin T. Bohl

University of Muenster ( email )

Schlossplatz 2
D-48149 Muenster, D-48149
Germany

David G. Mayes

University of Auckland (Deceased)

Private Bag 92019
Auckland Mail Centre
Auckland, 1142
New Zealand

Pierre L. Siklos (Contact Author)

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

Department of Economics
75 University Avenue W.
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

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