Globalization and inflation: Evidence from a time-varying VAR

Published

Journal Article

© 2014 Elsevier Inc. According to the Globalization Hypothesis, global-economic slack should progressively replace the domestic output gap in driving inflation as globalization increases. We investigate the empirical evidence in favor of this prediction by using a time-varying VAR. Two main results emerge from the analysis: First, global slack is found to affect the dynamics of inflation in many countries, yet its influence did not become stronger over time. Second, a panel analysis that exploits the cross-sections characteristics of our dataset shows that globalization, measured in terms of trade and financial openness, is positively related to the effects of global slack on inflation. We conclude that integration in the global economy is in fact important, but globalization has not yet induced changes in openness large enough to justify significant brakes in inflation dynamics.

Full Text

Duke Authors

Cited Authors

  • Bianchi, F; Civelli, A

Published Date

  • January 1, 2015

Published In

Volume / Issue

  • 18 / 2

Start / End Page

  • 406 - 433

International Standard Serial Number (ISSN)

  • 1094-2025

Digital Object Identifier (DOI)

  • 10.1016/j.red.2014.07.004

Citation Source

  • Scopus