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Thread: global view of inflation ...

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    Default global view of inflation ...

    (snip)" "There has been mounting evidence that the inflation process has been changing. (…) We argue that prevailing models of inflation are too “country-centric”, in the sense that they fail to take sufficient account of the role of global factors in influencing the inflation process. The relevance of a more “globe-centric” approach is likely to have increased as the process of integration of the world economy has gathered momentum, a process commonly referred to as “globalisation”. In a large cross-section of countries, we find some rather striking prima facie evidence that this has indeed been the case. In particular, proxies for global economic slack add considerable explanatory power to traditional benchmark inflation rate equations, even allowing for the influence of traditional indicators of external influences on domestic inflation, such as import and oil prices. Moreover, the role of such global factors has been growing over time, especially since the 1990s. And in a number of cases, global factors appear to have supplanted the role of domestic measures of economic slack." (snip)

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    Many would point out that, roughly translated, this simply means that individual countries can no longer control their own financial destinies. This is particularly the case for the US and other countries that no longer have a 'complete economic circle' of production and consumption within their own borders.

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    Default Re: global view of inflation ...

    It seems the rest of the world will end up importing inflation as well as consumer goods from China?

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    Default Re: global view of inflation ...

    ^^^ only those countries whose currency value winds up falling, like the US, which makes Chinese products more expensive in terms of 'domestic price' in US dollars ! But countries whose currencies are rising do not see this 'domestic price inflation' ... they see a loss of competitive advantage instead as Chinese products become even cheaper in terms of their 'domestic' currency (see thread on Canadian dollar) !

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