Global slack hypothesis: evidence from China, India and Pakistan

Syed Abbas

Empirical Economics, 2018, vol. 54, issue 2, No 12, 593-627

Abstract: Abstract It is widely believed that globalization has changed inflation process. The global resource capacity reduces responsiveness of inflation to domestic activity and increases responsiveness of inflation to global resource capacity. This global slack hypothesis is tested using different theoretical specifications, which also relate domestic output elasticity and foreign output elasticity to the degree of trade openness of an individual economy. The results reject this hypothesis. The global resource capacity does not drive domestic inflation. The impact of globalization has not increased in the inflation process, and the results yield important policy implications for monetary policy formulation. The global resource capacity does not affect ability of the central banks to stabilize inflation, real economic activity and also respond to the volatility of output growth.

Keywords: Globalization; Inflation dynamics; Foreign resource capacity; South Asia (search for similar items in EconPapers)
JEL-codes: E31 E52 F41 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://link.springer.com/10.1007/s00181-016-1207-0 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:spr:empeco:v:54:y:2018:i:2:d:10.1007_s00181-016-1207-0

Ordering information: This journal article can be ordered from
http://www.springer. ... rics/journal/181/PS2

DOI: 10.1007/s00181-016-1207-0

Access Statistics for this article

Empirical Economics is currently edited by Robert M. Kunst, Arthur H.O. van Soest, Bertrand Candelon, Subal C. Kumbhakar and Joakim Westerlund

More articles in Empirical Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().