Resource title

Flattening of the Short-run Trade-off between Inflation and Domestic Activity: The Analytics of the Effects of Globalization

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image for OpenScout resource :: Flattening of the Short-run Trade-off between Inflation and Domestic Activity: The Analytics of the Effects of Globalization

Resource description

This paper reviews the analytics of the effects of globalization on the Phillips curve and the utility-based objective function of the central bank. It demonstrates that in an endogenous-policy set up, when trade in goods is liberalized, financial openness increases, and in- and out-labor migration are allowed, policymakers become more aggressive on inflation and less responsive to the output gap. In other words, globalization induces the monetary authority, when guided in its policy by the welfare criterion of a representative household, to put more emphasis on the reduction of inflation variability, at the expense of an increase in the output gap variability.

Resource author

Assaf Razîn, Alon Binyamini

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/17875

Resource license

Adapt according to the presented license agreement and reference the original author.