A genie in a bottle?: Globalisation, competition and inflation
Declining inflation in many countries over the past few decades at the same time as rising global competition has led to a debate on the importance of globalisation for domestic inflation. This paper explores the implications of global value chain (GVC) integration and market contestability for infl...
Gespeichert in:
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| Weitere Verfasser: | , |
| Format: | Elektronisch E-Book |
| Sprache: | English |
| Veröffentlicht: |
Paris
OECD Publishing
2018
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| Schriftenreihe: | OECD Economics Department Working Papers
no.1462 |
| Schlagworte: | |
| Online-Zugang: | Volltext |
| Zusammenfassung: | Declining inflation in many countries over the past few decades at the same time as rising global competition has led to a debate on the importance of globalisation for domestic inflation. This paper explores the implications of global value chain (GVC) integration and market contestability for inflation using a range of industry-level and micro-data sources. We provide evidence that rising participation in GVCs has placed downward pressure on producer price inflation, by increasing the ability of firms to substitute domestic inputs with cheaper foreign equivalents. We investigate the channels, which suggests that increased GVC participation contributed to lower inflation via downward pressures on unit labour costs - by raising productivity and reducing wages - in the importing country, especially when low-wage countries are integrated in supply chains. We then present industry-level evidence to support the conjecture that a higher level of GVC integration dampens producer price inflation by accentuating the impact of global economic slack on domestic inflation. However, we also find an increasing trend in mark-ups, suggestive of rising market power, particularly in services sectors. Thus, looking forward, there is a risk that stalling globalisation since the crisis, coupled with stronger aggregate demand and declining market contestability, could lead to inflationary pressures in the medium term, thereby letting the inflation genie out of the bottle. |
| Beschreibung: | 1 Online-Ressource (39 p.) |
| DOI: | 10.1787/deda7e54-en |
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| spelling | Andrews, Dan VerfasserIn aut A genie in a bottle? Globalisation, competition and inflation Dan, Andrews, Peter, Gal and William, Witheridge Paris OECD Publishing 2018 1 Online-Ressource (39 p.) Text txt rdacontent Computermedien c rdamedia Online-Ressource cr rdacarrier OECD Economics Department Working Papers no.1462 Declining inflation in many countries over the past few decades at the same time as rising global competition has led to a debate on the importance of globalisation for domestic inflation. This paper explores the implications of global value chain (GVC) integration and market contestability for inflation using a range of industry-level and micro-data sources. We provide evidence that rising participation in GVCs has placed downward pressure on producer price inflation, by increasing the ability of firms to substitute domestic inputs with cheaper foreign equivalents. We investigate the channels, which suggests that increased GVC participation contributed to lower inflation via downward pressures on unit labour costs - by raising productivity and reducing wages - in the importing country, especially when low-wage countries are integrated in supply chains. We then present industry-level evidence to support the conjecture that a higher level of GVC integration dampens producer price inflation by accentuating the impact of global economic slack on domestic inflation. However, we also find an increasing trend in mark-ups, suggestive of rising market power, particularly in services sectors. Thus, looking forward, there is a risk that stalling globalisation since the crisis, coupled with stronger aggregate demand and declining market contestability, could lead to inflationary pressures in the medium term, thereby letting the inflation genie out of the bottle. Economics Gal, Peter MitwirkendeR ctb Witheridge, William MitwirkendeR ctb FWS01 ZDB-13-SOC FWS_PDA_SOC https://doi.org/10.1787/deda7e54-en Volltext |
| spellingShingle | Andrews, Dan A genie in a bottle? Globalisation, competition and inflation Economics |
| title | A genie in a bottle? Globalisation, competition and inflation |
| title_auth | A genie in a bottle? Globalisation, competition and inflation |
| title_exact_search | A genie in a bottle? Globalisation, competition and inflation |
| title_full | A genie in a bottle? Globalisation, competition and inflation Dan, Andrews, Peter, Gal and William, Witheridge |
| title_fullStr | A genie in a bottle? Globalisation, competition and inflation Dan, Andrews, Peter, Gal and William, Witheridge |
| title_full_unstemmed | A genie in a bottle? Globalisation, competition and inflation Dan, Andrews, Peter, Gal and William, Witheridge |
| title_short | A genie in a bottle? |
| title_sort | genie in a bottle globalisation competition and inflation |
| title_sub | Globalisation, competition and inflation |
| topic | Economics |
| topic_facet | Economics |
| url | https://doi.org/10.1787/deda7e54-en |
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