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Title: Globalization and Disinflation: A Note

Author(s): Assaf Razin

Publication Date: January 2005

Keyword(s): aggregate supply, captial market openness, inflation-output tradeoff and trade openness

Programme Area(s): International Macroeconomics

Abstract: We analyse how globalization forces induce monetary authorities, guided in their policies by the welfare criterion of a representative household, to put greater emphasis on reducing the inflation rate than on narrowing the output gaps. Specifically, I demonstrate how the relative weight of the output gap term in a utility-based loss function shrinks when the economy is open to international trade in goods, and is integrated to the world capital markets.

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Bibliographic Reference

Razin, A. 2005. 'Globalization and Disinflation: A Note'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=4826