For immediate release: July 8, 2009
Globalization and Inflation Forecasting Subject of Dallas Fed Report
DALLAS—Globalization probably hasn't made inflation more difficult to forecast in most countries, according to the July issue of the Federal Reserve Bank of Dallas' Economic Letter.
In "Has Greater Globalization Made Forecasting Inflation More Difficult?" vice president and director of the Dallas Fed's Globalization and Monetary Policy Institute Mark A. Wynne and research assistant Patrick Roy examine the links between inflation forecasting and globalization.
"U.S. inflation does appear to have become more difficult to forecast as we moved from the 1990s to the 2000s; however, the opposite seems true in almost every other country we looked at," the authors write.
Because monetary policy affects real economic activity and the price level with long and variable lags, forecasts of inflation are a key input to central banks' decisionmaking, Wynne and Roy state.
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