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Globalization, Financial Volatility and Monetary Policy

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  • Helmut Wagner
  • Wolfram Berger

Abstract

Recently it has often been claimed that globalization eases the job of central banks as it helps to tame inflation. This is used to argue that central banks (particularly the ECB, referring to the objectives as laid down in the EU Treaty) could or should reduce their efforts in the fight against inflation in favor of supporting the general economic policies of the governments. This paper takes a critical look at this argument, pointing to the structural changes associated with globalization and to the corresponding increase in uncertainty by which the central banks are affected. As an example of this, the increase in financial volatility is analyzed and explained as the result of optimal portfolio allocation, and its implications for monetary policy are discussed. Copyright Kluwer Academic Publishers 2004

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  • Helmut Wagner & Wolfram Berger, 2004. "Globalization, Financial Volatility and Monetary Policy," Economic Change and Restructuring, Springer, vol. 31(2), pages 163-184, June.
    • Handle: RePEc:kap:ecopln:v:31:y:2004:i:2:p:163-184
    DOI: 10.1007/s10633-004-0915-4
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    3. Helmut Wagner, 2006. "Fiscal Issues in the New EU Member Countries - Prospects and Challenges," SUERF Studies, SUERF - The European Money and Finance Forum, number 2006/1 edited by Morten Balling, May.
    4. Tomislav Globan, 2015. "Financial integration, push factors and volatility of capital flows: evidence from EU new member states," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 42(3), pages 643-672, August.
    5. L. Arturo Bernal Ponce & Humberto Valencia Herrera, 2010. "Relación entre inflación y volatilidad de derivados financieros: el caso de México," Revista de Administración, Finanzas y Economía (Journal of Management, Finance and Economics), Tecnológico de Monterrey, Campus Ciudad de México, vol. 4(1), pages 18-28.
    6. Helmut Wagner, 2010. "The causes of the recent financial crisis and the role of central banks in avoiding the next one," International Economics and Economic Policy, Springer, vol. 7(1), pages 63-82, May.
    7. Helmut Wagner, 2012. "Is harmonization of legal rules an appropriate target? Lessons from the global financial crisis," European Journal of Law and Economics, Springer, vol. 33(3), pages 541-564, June.
    8. L. Arturo Bernal Ponce & Francisco Venegas Martínez, 2011. "Impacto de los productos derivados los objetivos de política monetaria: un modelo de equilibrio general," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 26(2), pages 187-216.

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