However, as the Governor of the Central Bank of Chile, Rodrigo Vergara, recently reminded us, output gaps do not appear to explain much about the currently observed inflation, particularly in emerging markets.4 Currency depreciation, by contrast, is a clearer source of inflationary pressure. So what are emerging-market central banks to do?
Gutierrez, German and Thomas Philippon (2017), “Declining Competition and Investment in the US,” CEPR Discussion Paper No. 12536. Gutierrez, German and Thomas Philippon (2018), “How EU Markets Became More Competitive than US Markets: A Study of Institutional Drift,” CEPR Discussion Paper No. 12983. Lane, Philip R. (2018), “Globalisation and the Irish Economy: A Macro-Financial Perspective,” Geary Lecture, Economic and Social Research Institute.