Globalization and Inflation: Structural Evidence from a Time Varying VAR Approach

Francesco Bianchi and Andrea Civelli

No 13-20, Working Papers from Duke University, Department of Economics

Abstract: Under the Globalization Hypothesis for inflation, as globalization increases, global economic slack should progressively replace the domestic gap in driving inflation. In order to assess the empirical support for this theoretical prediction, we use impulse response functions of inflation to domestic and foreign output gap shocks from a TV-VAR model estimated for eighteen countries. The main results of the analysis are twofold: First, the structural results show that global slack affects the dynamics of inflation in many countries, yet these effects do not get stronger over time. Second, a panel analysis that exploits the cross-section characteristics of the response functions shows that globalization, measured in terms of openness and business cycles integration, is positively related to the effects of global slack on inflation. The degree of openness of a country and its economic integration into the global economy are complementary rather than overlaid forces.

Keywords: Globalization; Inflation; Time-variation; VAR (search for similar items in EconPapers)
JEL-codes: E31 F02 F41 (search for similar items in EconPapers)
Pages: 48
Date: 2013
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2331600 main text

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:duk:dukeec:13-20

Access Statistics for this paper

More papers in Working Papers from Duke University, Department of Economics Department of Economics Duke University 213 Social Sciences Building Box 90097 Durham, NC 27708-0097.
Bibliographic data for series maintained by Department of Economics Webmaster ().