№ 1/2023

Fìnansi Ukr. 2023 (1): 85–101https://doi.org/10.33763/finukr2023.01.085

MONETARY POLICY

KYRYLENKO Volodymyr ¹, KHOKHYCH Dmytro ²

¹Kyiv National Economic University named after Vadym Hetman
OrcID ID : https://orcid.org/0000-0002-7433-0630
²Kyiv National Economic University named after Vadym Hetman
OrcID ID : https://orcid.org/0000-0003-3787-939X

The impact of globalization on the dynamics of inflation

Introduction. The article studies the impact of globalization on the dynamics of inflation due to increased integration between developed economies and emerging countries in the period 1990-2022, its causes and effects.
Problem Statement. Based on the analysis of statistical data, it was established that global inflation in the world economy has a direct impact on domestic inflation in emerging countries, as well as a pronounced structural character in developed countries. This means that even minor disruptions in global trade channels can cause inflation.
Purpose. Explaining the impact of globalization on the level of inflation in developed countries and commodity economies through the expansion of trade integration, the strengthening of the role of emerging markets, price competition and the increase in the volatility of interest rates.
Methods. According to the results of a dispersion analysis, a hypothesis of the existence of a connection between the components of globalization channels and inflation indicators, which determine the volatility of prices for goods and services in the medium term was investigated .
Results. The global components of each inflation indicator are analyzed for the full sample of advanced economies and emerging markets. CPI and producer price index are found to have a significant common global component, accounting for 40% of the difference in CPI inflation and 52% in producer price index inflation of the countries in the sample. However, the role of the common component is much smaller for core inflation and wage inflation. The first main component of inflation accounts for about 21-26% of the variation in inflation for different samples.
Conclusions. The increase in the global component of inflation over the past two decades can be explained by major global crises arising from high volatility of commodity prices, greater sensitivity of countries to global shocks due to increased trade or financial integration, or closer direct links between economies. The effect of the transfer of global inflation on domestic prices requires that the central bank should conduct a tighter monetary policy towards achieving the price stability.

Keywords:globalization, central bank, inflation, targeting, commodity markets, volatility, international trade, price stability

JEL: E31, F60

Kyrylenko V. . The impact of globalization on the dynamics of inflation / V. Kyrylenko, D. . KHOKHYCH // Фінанси України. - 2023. - № 1. - C. 85-101.

Article original in Ukrainian (pp. 85 - 101)

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