The non-monetary side of the global disinflation

Gregor Schwerhoff and Mouhamadou Sy
Additional contact information
Mouhamadou Sy: PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

PSE Working Papers from HAL

Abstract: The dramatic decline in inflation across the world over the last 20 years has been largely credited to improved monetary policy. The universal nature of the phenomenon and its simultaneity with globalization however indicate that there might also be a "real" side to it. We build a model based on Melitz (2003) in which falling transport cost lead to greater openness, higher productivity and lower inflation. Following a decline in transport cost openness increases and firm selection eliminates the least productive domestic firms. The consequent increase in average productivity leads to falling relative prices for goods. A cash-in-advance constraint allows to analyse how falling relative prices can lead to lower inflation. Using a dataset of macroeconomic variables for 107 countries from all world regions we are able to show that openness-induced productivity growth leads to a significant decline in inflation world wide.

Keywords: globalization; openness; productivity; disinflation; mondialisation; ouverture; productivité; désinflation (search for similar items in EconPapers)
Date: 2013-06
New Economics Papers: this item is included in nep-cba, nep-cis, nep-mac, nep-mic and nep-opm
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00564957v2
References: Add references at CitEc
Citations:

Downloads: (external link)
https://shs.hal.science/halshs-00564957v2/document (application/pdf)

Related works:
Journal Article: The Non-Monetary Side of the Global Disinflation (2014)
Working Paper: The non-monetary side of the global disinflation (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:psewpa:halshs-00564957

Access Statistics for this paper

More papers in PSE Working Papers from HAL
Bibliographic data for series maintained by CCSD ().