Is Globalization Weakening the Inflation-Output Relationship?

25 Pages Posted: 5 Dec 2013

See all articles by Antonia López-Villavicencio

Antonia López-Villavicencio

University of Angers - Centre d'économie de l'Université de Paris Nord (CEPN)

Sophie Saglio

University Paris 8

Multiple version iconThere are 2 versions of this paper

Date Written: December 5, 2013

Abstract

This paper investigates whether trade and financial openness has weakened the inflation-output trade-off and caused a shift in the preferences of monetary authorities. Based on the backward-looking Phillips curve and a Taylor-type interest rate rule, our results for France, the UK and the USA for the 1970-2012 period do not provide support for the relevance of globalization in making inflation less responsive to output expansions. Moreover, the change of preferences of Central Banks towards growth-oriented objectives is neither due to higher trade nor to financial globalization.

Keywords: Phillips curve, globalization, state-space model, Taylor rule, inflation

JEL Classification: F15

Suggested Citation

López-Villavicencio, Antonia and Saglio, Sophie, Is Globalization Weakening the Inflation-Output Relationship? (December 5, 2013). Available at SSRN: https://ssrn.com/abstract=2363844 or http://dx.doi.org/10.2139/ssrn.2363844

Antonia López-Villavicencio (Contact Author)

University of Angers - Centre d'économie de l'Université de Paris Nord (CEPN) ( email )

UMR7115
Université Paris-Nord
Paris XIII
France

Sophie Saglio

University Paris 8 ( email )

2 rue de la Liberté
Paris, 93526
France

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