4  BIS Review 37/2005  Globalization and the iInflation process Several observers have argued that increased trade has been an important factor in the downtrend in inflation over the past two decades.6 One channel is said to be through greater competitive pressures and another through increased support for price stability engendered by the competitive environment.
Globalization might restrain prices and wages in those sectors in which imports play an increasing role, but how does it hold back the average wage and price level? And, how do we reconcile the sense of greater competitive pressures with record levels of profits - and capital income more generally - in the United States?