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Globalisation, import prices and inflation: how reliable are the ‘tailwinds’?

By Alex Bowen and Karen Mayhew

Abstract

It is sometimes argued that increasing globalisation and openness to trade has exerted downward pressure on inflation in developed countries by, for example, reducing import prices. But, as recent experience of rising commodity prices suggests, globalisation may sometimes be associated with rising import prices. And, even when import prices were falling, the consequences for inflation depended on whether the changes in real incomes brought about were anticipated by households and how monetary policy reacted. Studies that neglect expectations and the role of monetary policy in determining inflation are likely to mismeasure the impact of globalisation on domestic inflation

Topics: HC Economic History and Conditions, HD Industries. Land use. Labor, HF Commerce
Publisher: Bank of England
Year: 2008
OAI identifier: oai:eprints.lse.ac.uk:39931
Provided by: LSE Research Online
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