Discussion Paper

No. 2012-56 | October 31, 2012
Globalisation Effect on Inflation in the Great Moderation Era: New Evidence from G10 Countries

Abstract

Dynamic econometric models are carefully built to analyse counterfactually the globalisation effect on inflation for ten countries from G10 during the Great Moderation period. The main findings are (i) the effect is highly heterogeneous from country to country; (ii) increases in trade openness could be either inflationary or deflationary whereas increased imports from low-cost emerging-market economies are mostly deflationary; and (iii) there is almost no direct globalisation impact as far as inflation persistence is concerned while the impact on inflation variability can be positive as well as negative. Overall, globalisation is found to have contributed positively to lowering rather than stabilising inflation during the Great Moderation era.

JEL Classification

E37 F41 C52 E31

Cite As

Duo Qin and Xinhua He (2012). Globalisation Effect on Inflation in the Great Moderation Era: New Evidence from G10 Countries. Economics Discussion Papers, No 2012-56, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2012-56

Assessment



Comments and Questions


Anonymous - To appraise and add suggestions
November 01, 2012 - 14:25

Even the authors "adopt only two here – import price and trade openness indicators" and "model how much inflation of a specific country is affected by foreign markets, rather than how much global inflation is affected by global market supply and demanding conditions" for since the early 1990s, a period ...[more]

... referred to as the ‘Great Moderation’ (see Bernanke), which period by any means differs essentially in the period before, throughout and after the great recession of 2007-09 that could be well seen on the Papers' Figures 1,2,3,4, and 5 the conclusions are aggregating the conclusive role of the globalization and the inflow of cheaper goods and services from the emerging to the developed markets to lower inflation and in cases to prompt deflation. Whereas, it could be well considered that such inflow is natural continuation of the improving high technologies in manufacturing and rising productivity, which supplemented by China's proactive approaches in economics have been increasingly flooding the developed and developing markets alike with cheaper manufacturing goods and services, that process had tipped off the world industrial production balance, process greatly accelerated. The inflation and deflation under these conditions should be prospected from a global picture, whereas the decreasing consumption-ability in most developed countries and the lower demand have additionally affected these processes. I recommend the authors for their hard work and notion to seek new approaches, and I would like to recommend them locate the appointed period ref the pre, on and post recession time combined with the market balance comprehension to give us a even better paper...


Anonymous - Invited Reader Comment
January 07, 2013 - 09:41

see attached file


Xinhua He - author's reply
February 05, 2013 - 07:31

Thanks for your helpful comments. We will revise our paper accordingly.


Duo Qin and Xinhua He - Response to co-editor
May 29, 2013 - 08:45

see attached file