How has Globalisation Affected Inflation Dynamics in the United Kingdom?

7 Pages Posted: 1 Oct 2008

See all articles by Jennifer V. Greenslade

Jennifer V. Greenslade

Bank of England - External MPC Unit

Stephen Millard

Bank of England

Chris Peacock

Bank of England - Monetary Analysis

Abstract

This article discusses how globalisation may influence the way inflation moves over the business cycle in the United Kingdom. Globalisation may do this by affecting how costs respond to changes in economic activity in the United Kingdom or by affecting how inflation responds to changes in costs. Some evidence is presented that suggests globalisation may have led to an increase in the importance of import prices relative to domestic economic activity in explaining changes in firms' costs. But, once this has been taken into account, the response of inflation to movements in costs does not appear to have changed over recent years. This suggests it is increasingly important to understand what drives movements in import prices, particularly given the rapid rise in global food and energy prices over the past year.

Suggested Citation

Greenslade, Jennifer V. and Millard, Stephen and Peacock, Chris, How has Globalisation Affected Inflation Dynamics in the United Kingdom?. Bank of England Quarterly Bulletin, Q3, 2008, Available at SSRN: https://ssrn.com/abstract=1275769

Jennifer V. Greenslade (Contact Author)

Bank of England - External MPC Unit ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Stephen Millard

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Chris Peacock

Bank of England - Monetary Analysis ( email )

Threadneedle Street
London EC2R 8AH
United Kingdom

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