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Globalisation and its implications for inflation in advanced economies

Maria Grazia Attinasi and Mirco Balatti

Economic Bulletin Articles, 2021, vol. 4

Abstract: The globalisation of inflation hypothesis argues that the factors influencing inflation dynamics are becoming increasingly global. The interest in the global determinants of inflation stems from the observed co-movement of inflation rates across advanced economies (AEs) amid the growing internationalisation of goods, services and financial markets. This article reviews recent inflation developments across AEs and the channels through which globalisation can feed into the more persistent component of inflation. The article finds that three elements of globalisation appear to be linked to a lower persistent inflation: trade integration, informational globalisation and global value chain participation. However, available estimates suggest that this effect is economically small, and the article concludes that globalisation does not appear to be a key determinant of the synchronisation and decline in inflation rates observed across AEs. Looking ahead a reversal (or further slowdown) of globalisation trends could provide only limited tailwinds for inflation trends. JEL Classification: E31, E42, E50, F36, F40, F60

Keywords: Inflation; international integration; monetary regimes; open economy (search for similar items in EconPapers)
Date: 2021-06
Note: 930374
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