Globalization and Disinflation: A Note

Assaf Razin

No 4826, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We analyse 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 (search for similar items in EconPapers)
JEL-codes: E50 F02 (search for similar items in EconPapers)
Date: 2005-01
New Economics Papers: this item is included in nep-cba and nep-mac
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Citations: View citations in EconPapers (3)

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Working Paper: Globalization and Disinflation: A Note (2004)
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