Chapter

The Effects of Globalization on Inflation, Liquidity, and Monetary Policy

Edited by Lucas Papademos

in International Dimensions of Monetary Policy

Published by University of Chicago Press

Published in print March 2010 | ISBN: 9780226278865
Published online February 2013 | e-ISBN: 9780226278872 | DOI: http://dx.doi.org/10.7208/chicago/9780226278872.003.0012
The Effects of Globalization on Inflation, Liquidity, and Monetary Policy

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This chapter describes the effects of globalization on inflation, liquidity, and monetary policy. It is seen that the effects of globalization on product, labor, and financial markets can be potentially far-reaching. The phenomenon of globalization neither calls for any fundamental change in the monetary policy strategy nor does it affect in any material way the general effectiveness of monetary policy. Globalization implies a greater emphasis on the price stability objective over a medium- to longer-term horizon. It also implies that monetary analysis has become more challenging but at the same time relatively more important for assessing long-term risks to price stability and financial stability. A close monitoring and careful analysis of the empirical evidence and an improved understanding of the influence of globalization on the monetary policy transmission mechanism is required. This will help improve the quality of the analysis to contribute to the safeguarding of financial stability.

Keywords: globalization; inflation; liquidity; monetary policy; labor; financial markets

Chapter.  7107 words. 

Subjects: Macroeconomics and Monetary Economics

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