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The Globalisation of Inflation

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The Globalisation of Inflation

The Growing Importance of Global Value Chains

CESifo Group Munich,

5 Minuten Lesezeit
5 Take-aways
Audio & Text

Was ist drin?

Globalization is changing the dynamics and transition mechanisms of inflation.

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Editorial Rating

8

Qualities

  • Analytical
  • Innovative
  • Well Structured

Recommendation

Traditional measures of inflation once largely depended on a nation’s economic conditions and the relative play among its supply, demand and output pressures. However, since the extensive proliferation of global value chains, some experts think that the international economic system can now measurably affect an economy’s domestic inflation. Economists Raphael Auer, Claudio Borio and Andrew Filardo investigate that idea in this in-depth empirical study. Their findings suggest that global production dynamics could have a significant impact on a country’s internal prices. getAbstract recommends this rigorous, scholarly report to economists, analysts and policy experts concerned about the viability of national monetary policy and control.

Summary

Globalization has taken center stage as a defining influence in the international economy. One function of the complex web of global value chains (GVCs) is to avoid bottlenecks by moving processes among countries with “slack” – available labor and other resource capacities. Supply chains are now inextricably linked on a global scale. But one consequence of this dynamic is that global slack then affects national levels of output and prices and hence, inflation. This situation counters traditional economic thinking, in which...

About the Authors

Raphael Auer, Claudio Borio and Andrew Filardo are economists at the Bank for International Settlement.

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