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Flattened Inflation-Output Tradeoff and Enhanced Anti-Inflation Policy: Outcome of Globalization?

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  • Assaf Razin
  • Alon Binyamini

Abstract

The paper provides a unified analysis of globalization effects on the Phillips curve and monetary policy, in a New-Keynesian framework. The main proposition of the paper is twofold. Labor, goods, and capital mobility flatten the tradeoff between inflation and activity. If policy makers are guided by the welfare criterion of the representative household, globalization forces also lead monetary policy to be more aggressive with regard to inflation fluctuations but, at the same time, more benign with respect to the output-gap fluctuations.

Suggested Citation

  • Assaf Razin & Alon Binyamini, 2007. "Flattened Inflation-Output Tradeoff and Enhanced Anti-Inflation Policy: Outcome of Globalization?," NBER Working Papers 13280, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:13280
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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