Discussion Paper Details

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Title: Globalization and the Output-inflation Tradeoff: New Time Series Evidence

Author(s): Sylvester C W Eijffinger and Zongxin Qian

Publication Date: February 2010

Keyword(s): openness, output-inflation tradeoff, Phillips curve and time inconsistency theory

Programme Area(s): International Macroeconomics

Abstract: Recent cross-country studies on the globalization and output-inflation tradeoff correlation find openness has no significant effect on OECD countries. Those studies assume parameter constancy across countries. In this paper, we argue that this assumption does not hold for major industrialized countries. Using individual time series analysis, we find the effect of openness on the output-inflation trade off differ in sign and size across countries. In contrast to previous cross-country studies, we find globalization has significantly changed some major industrialized countries? output inflation tradeoff. This has important implications for future theoretical and empirical research.

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Bibliographic Reference

Eijffinger, S and Qian, Z. 2010. 'Globalization and the Output-inflation Tradeoff: New Time Series Evidence'. London, Centre for Economic Policy Research.