Globalisation, Domestic Inflation and Global Output Gaps: Evidence from the Euro Area *

@inproceedings{Calza2009GlobalisationDI,
  title={Globalisation, Domestic Inflation and Global Output Gaps: Evidence from the Euro Area *},
  author={Alessandro Calza},
  year={2009}
}
This paper tests whether the proposition that globalisation has led to greater sensitivity of domestic inflation to the global output gap (the "global output gap hypothesis") holds for the euro area. The empirical analysis uses quarterly data over the period 1979–2003. Measures of the global output gap using two different weighting schemes (based on PPPs and trade data) are considered. We find little evidence that global capacity constraints have either explanatory or predictive power for… CONTINUE READING

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