Globalisation and the Slope of the Phillips Curve
CESifo, Munich, 2021
CESifo Working Paper No. 9383
We study the effects of globalisation on the slope of the New Keynesian Phillips curve for CPI inflation, based on a broad panel of 35 countries and controlling for possibly non-linear exchange rate effects. We find that the output gap generally has a significant positive effect on inflation, but that this effect decreases as integration in the global economy increases. We conclude that the advance of globalisation has been a key force behind the flattening of price Phillips curves across the world.