Globalization, Domestic Inflation and Global Output Gaps: Evidence from the Euro Area

Alessandro Calza

International Finance, 2009, vol. 12, issue 3, 301-320

Abstract: This paper tests whether the proposition that globalization has led to greater sensitivity of domestic inflation to the global output gap (the ‘global output gap hypothesis’) holds for the euro area. The empirical analysis uses quarterly data over the period 1979–2003. Measures of the global output gap using two different weighting schemes (based on purchasing power parities and trade data) are considered. We find limited evidence that global capacity constraints have explanatory power for domestic consumer price inflation in the euro area. Based on these findings, the prescription that central banks should specifically react to developments in global output gaps does not seem to be justified for the euro area.

Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (35)

Downloads: (external link)
https://doi.org/10.1111/j.1468-2362.2009.01248.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:intfin:v:12:y:2009:i:3:p:301-320

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1367-0271

Access Statistics for this article

International Finance is currently edited by Benn Steil

More articles in International Finance from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().