Revisiting Globalisation and Inflation

I had posted earlier on the subject as well where I put forward a lot of empirical work arguing that globalization should be a factor for lower inflation but so far the evidence has not been conclusiveenough.

I just came across two pieces on the subject which say globalisation has infact lowered inflation.   One is a speech by Randall Krozner (Fed Governor) and another is a paper by BIS team including Claudio E. V. Borio and Andrew Filardo. Here is the abstract:

There has been mounting evidence that the inflation process has been changing. Inflation is now much lower and much more stable around the globe. And its sensitivity to measures of economic slack and increases in input costs appears to have declined. Probably the most widely supported explanation for this phenomenon is that monetary policy has been much more effective. …. In a large cross-section of countries, we find some rather striking prima facie evidence that this has indeed been the case. In particular, proxies for global economic slack add considerable explanatory power to traditional benchmark inflation rate equations, even allowing for the influence of traditional indicators of external influences on domestic inflation, such as import and oil prices. Moreover, the role of such global factors has been growing over time, especially since the 1990s. And in a number of cases, global factors appear to have supplanted the role of domestic measures of economic slack.

I have just finished reading the speech and am yet to read the paper. The speech is quite good a la Krozner.

Update: There is another fiery speech from Jeff Lacker (Richmond Fed President) on why Central Banks are responsible for inflation and inflation expectations.

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