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Globalisation and the Slope of the Phillips Curve

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  • Emanuel Kohlscheen
  • Richhild Moessner

Abstract

We study the effects of globalisation on the slope of the New Keynesian Phillips curve for CPI inflation, based on a broad panel of 35 countries and controlling for possibly non-linear exchange rate effects. We find that the output gap generally has a significant positive effect on inflation, but that this effect decreases as integration in the global economy increases. We conclude that the advance of globalisation has been a key force behind the flattening of price Phillips curves across the world.

Suggested Citation

  • Emanuel Kohlscheen & Richhild Moessner, 2021. "Globalisation and the Slope of the Phillips Curve," CESifo Working Paper Series 9383, CESifo.
    • Handle: RePEc:ces:ceswps:_9383
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    References listed on IDEAS

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    1. Kristin Forbes, 2019. "Has globalization changed the inflation process?," BIS Working Papers 791, Bank for International Settlements.
    2. Jongrim Ha & M. Ayhan Kose & Franziska Ohnsorge, 2021. "Inflation During the Pandemic: What Happened? What is Next?," Koç University-TUSIAD Economic Research Forum Working Papers 2108, Koc University-TUSIAD Economic Research Forum.
    3. Auer, Raphael A. & Degen, Kathrin & Fischer, Andreas M., 2013. "Low-wage import competition, inflationary pressure, and industry dynamics in Europe," European Economic Review, Elsevier, vol. 59(C), pages 141-166.
    4. Sophocles Mavroeidis & Mikkel Plagborg-Møller & James H. Stock, 2014. "Empirical Evidence on Inflation Expectations in the New Keynesian Phillips Curve," Journal of Economic Literature, American Economic Association, vol. 52(1), pages 124-188, March.
    5. Auer, Raphael A. & Degen, Kathrin & Fischer, Andreas M., 2013. "Low-wage import competition, inflationary pressure, and industry dynamics in Europe," European Economic Review, Elsevier, vol. 59(C), pages 141-166.
    6. Jonathon Hazell & Juan Herreño & Emi Nakamura & Jón Steinsson, 2022. "The Slope of the Phillips Curve: Evidence from U.S. States," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 137(3), pages 1299-1344.
    7. Olivier Blanchard, 2016. "The Phillips Curve: Back to the '60s?," American Economic Review, American Economic Association, vol. 106(5), pages 31-34, May.
    8. Jašová, Martina & Moessner, Richhild & Takáts, Előd, 2020. "Domestic and global output gaps as inflation drivers: What does the Phillips curve tell?," Economic Modelling, Elsevier, vol. 87(C), pages 238-253.
    9. Axel Dreher, 2006. "Does globalization affect growth? Evidence from a new index of globalization," Applied Economics, Taylor & Francis Journals, vol. 38(10), pages 1091-1110.
    10. Claudio E. V. Borio & Andrew Filardo, 2007. "Globalisation and inflation: New cross-country evidence on the global determinants of domestic inflation," BIS Working Papers 227, Bank for International Settlements.
    11. Emanuel Kohlscheen & Richhild Moessner, 2021. "Globalisation and the Decoupling of Inflation from Domestic Labour Costs," CESifo Working Paper Series 9281, CESifo.
    12. Laurence M. Ball, 2006. "Has Globalization Changed Inflation?," NBER Working Papers 12687, National Bureau of Economic Research, Inc.
    13. Martina Jašová & Richhild Moessner & Elöd Takáts, 2019. "Exchange Rate Pass-Through: What Has Changed Since the Crisis?," International Journal of Central Banking, International Journal of Central Banking, vol. 15(3), pages 27-58, September.
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    Cited by:

    1. Kukacka, Jiri & Sacht, Stephen, 2023. "Estimation of heuristic switching in behavioral macroeconomic models," Journal of Economic Dynamics and Control, Elsevier, vol. 146(C).
    2. Cohen, Lior, 2022. "Globalization and Monetary Policy," EconStor Preprints 306556, ZBW - Leibniz Information Centre for Economics.
    3. Ampudia, Miguel & Lombardi, Marco Jacopo & Renault, Théodore, 2024. "The wage-price pass-through across sectors: evidence from the euro area," Working Paper Series 2948, European Central Bank.
    4. Aginta, Harry, 2023. "Revisiting the Phillips curve for Indonesia: What can we learn from regional data?," Journal of Asian Economics, Elsevier, vol. 85(C).
    5. Jana Budova & Veronika Sulikova & Marianna Sinicakova, 2023. "When Inflation Again Matters: Do Domestic and Global Output Gaps Determine Inflation in the EU?," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 25(63), pages 575-575, April.

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    More about this item

    Keywords

    inflation; globalisation; openness; output gap; Phillips curve;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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