Read on Twitter
This tweet by @AngelUbide reminded me of one thing.
I wanted to write a thread on why I think globalization did not play a major role in driving us to a low inflation environment and therefore why de-globalization (should it occur) will no gives us inflation back.
1/N https://twitter.com/AngelUbide/status/1359540651478679555
I wanted to write a thread on why I think globalization did not play a major role in driving us to a low inflation environment and therefore why de-globalization (should it occur) will no gives us inflation back.
1/N https://twitter.com/AngelUbide/status/1359540651478679555
There is a lively scientific debate on this matter. This regards both the level of inflation as well as the "slope" of the Phillips curve. Besides the relative merits of the various papers , one simple fact is hard to square with the globalization->low inflation hypothesis
2/N
2/N
Inflation was tamed between the beginning of the 80s, mid 90s, see for instance LHS chart from this speech by Phillip Lane
3/N
https://www.ecb.europa.eu/press/key/date/2020/html/ecb.sp200522~45e87ab7ae.en.html
3/N
https://www.ecb.europa.eu/press/key/date/2020/html/ecb.sp200522~45e87ab7ae.en.html
This is also the period in which the form correlation between inflation and measures of slack (aka the "slope" of the Phillips curve, in a reduced form sense) fell the most
4/N
4/N
But globalization really took off AFTER the the mid 90s, see for instance these measures by @heimbergecon in the paper linked below
5/N
https://link.springer.com/article/10.1007/s10290-020-00391-1
5/N
https://link.springer.com/article/10.1007/s10290-020-00391-1
This is not to say that price setting has not changed. It probably has. But many other factors could have played a role (automation, the loss of workers bargaining power, etc. etc.). Globalization is just one of many factors. In my view not the most important.
6/N
6/N
Some resources for those interested, with papers by @gprimice, @miclenza, @marcodelnegro, @Francesco_Bia, @ricco_giovanni @marco_jacopo @MariannaRiggi (others might be on Twitter by I don't know their handles, apologies!)
N/N
N/N
