Globalization and Disinflation: A Note

17 Pages Posted: 13 Apr 2005

See all articles by Assaf Razin

Assaf Razin

Tel Aviv University - Eitan Berglas School of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

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Date Written: January 2005

Abstract

We analyze how globalization forces induce monetary authorities, guided in their policies by the welfare criterion of a representative household, to put greater emphasis on reducing the inflation rate than on narrowing the output gaps. Specifically, I demonstrate how the relative weight of the output gap term in a utility-based loss function shrinks when the economy is open to international trade in goods, and is integrated to the world capital markets.

Keywords: Aggregate supply, trade openness, captial market openness, inflation-output tradeoff

JEL Classification: E50, F02

Suggested Citation

Razin, Assaf, Globalization and Disinflation: A Note (January 2005). CEPR Dicussion Paper No. 4826. Available at SSRN: https://ssrn.com/abstract=702962

Assaf Razin (Contact Author)

Tel Aviv University - Eitan Berglas School of Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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CESifo (Center for Economic Studies and Ifo Institute)

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Germany

HOME PAGE: http://www.CESifo.de

Centre for Economic Policy Research (CEPR)

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United Kingdom

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