Nominal Stability and Financial Globalization

Michael Devereux, Ozge Senay and Alan Sutherland ()

Journal of Money, Credit and Banking, 2014, vol. 46, issue 5, 921-959

Abstract: Over the past four decades, there has been a substantial increase in financial globalization, that is, rapid growth in gross external portfolio positions. There has also been a substantial fall in the variability of inflation. Many economists have conjectured that financial globalization contributed to the improved inflation performance. This paper explores the causal link running in the opposite direction. Using an open economy model with endogenous portfolio choice, it is shown that a monetary rule that reduces inflation variability tends to increase the size of gross external asset positions. This result appears to be robust across different modeling specifications.

Date: 2014
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Citations: View citations in EconPapers (11)

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https://doi.org/10.1111/jmcb.12127

Related works:
Working Paper: Nominal Stability and Financial Globalization (2013)
Working Paper: Nominal Stability and Financial Globalization (2012)
Working Paper: Nominal Stability and Financial Globalization (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:46:y:2014:i:5:p:921-959

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