Higher productivity growth can lead to a reduction in inflation because it directly lowers prices if monetary policy does not become more expansionary. In addition, such growth makes it easier for the monetary authorities to allow inflation to fall because output growth will continue to be rapid when inflation is declining.
This may have been the situation in the United States in the late 1990s, when productivity growth surged and inflation declined. The rise in productivity growth during this period in the United States, however, did not seem to spill over to other industrial countries, a result that cast doubt on whether globalization has indeed accelerated the transmission of productivity growth across national borders.