Globalization and Inflation

Type: Reports Written by Kshitij Batra | Saturday 1 July 2006

The effects of globalization on inflation are complicated and substantial research on this topic has been lacking, producing a level of uncertainty. This paper hopes to address four key aspects of the issue: how globalization is affecting prices, wages, asset prices and the overall implications for monetary policy. While in the long–run globalization tends to have a null effect on inflation as imbalances like wage–expectations and price arbitrage are corrected, in the short–run, the impact is more uncertain.

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