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Globalisation and industry concentration: What are the consequences for inflation dynamics?

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  • Sophie Guilloux-Nefussi

Abstract

Since the mid-1980s, there has been a weakening of the correlation between inflation and output in advanced countries. Why? One of the prime suspects is globalisation. Aside from the well-known effects of lower wages abroad and cheaper imported goods, globalisation may also encourage concentration at home and allow the most efficient domestic firms to grow larger by accessing international markets. In addition, large companies have room to actively adjust their markup in order to keep relative prices low and preserve their market share. This strategic behaviour may have dampened the response of inflation to domestic slack over the last 30 years even if the process may have stabilised over the last decade.

Suggested Citation

  • Sophie Guilloux-Nefussi, 2017. "Globalisation and industry concentration: What are the consequences for inflation dynamics?," Rue de la Banque, Banque de France, issue 45, june..
    • Handle: RePEc:bfr:rueban:2017:45
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    References listed on IDEAS

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    1. Guilloux-Nefussi, Sophie, 2020. "Globalization, market structure and inflation dynamics," Journal of International Economics, Elsevier, vol. 123(C).
    2. A. W. Phillips, 1958. "The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861–1957," Economica, London School of Economics and Political Science, vol. 25(100), pages 283-299, November.
    3. Blanchard, Oliver & Cerutti, Eugenio & SUmmers, Lawrence, 2015. "Inflation and Activity - Two Explorations and Their Monetary Policy Implications," Working Paper Series 15-070, Harvard University, John F. Kennedy School of Government.
    4. N. Chatelais & K. Schmidt, 2017. "The impact of import prices on inflation in the euro area," Rue de la Banque, Banque de France, issue 37, january..
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