Tesco
The Globalisation of Inflation
Report

The Globalisation of Inflation

The Growing Importance of Global Value Chains

Raphael Auer, Claudio Borio and Andrew Filardo
CESifo Group Munich, 2017
Get the Report

Read or listen offline

auto-generated audio
  • 0.5×
  • 0.75×
  • 1×
  • 1.25×
  • 1.5×
  • 1.75×
1×
auto-generated audio

Editorial Rating

8

Qualities

  • Analytical
  • Innovative
  • Well Structured

Recommendation

Traditional measures of inflation once largely depended on a nation’s economic conditions and the relative play among its supply, demand and output pressures. However, since the extensive proliferation of global value chains, some experts think that the international economic system can now measurably affect an economy’s domestic inflation. Economists Raphael Auer, Claudio Borio and Andrew Filardo investigate that idea in this in-depth empirical study. Their findings suggest that global production dynamics could have a significant impact on a country’s internal prices. getAbstract recommends this rigorous, scholarly report to economists, analysts and policy experts concerned about the viability of national monetary policy and control.

Take-Aways

  • One function of  the complex web of global value chains (GVCs) is to avert bottlenecks by moving production processes among countries with “slack” – available labor and other resource capacities.
  • Because of GVCs, global slack affects national levels of output and prices and, as a result, domestic inflation.
  • The “globalization of inflation” (GI) implies that national leaders must contend with this effect in managing their country’s inflation expectations and price stability.

About the Authors

Raphael Auer, Claudio Borio and Andrew Filardo are economists at the Bank for International Settlement.

Comment on this summary or Start Discussion