Taking such a medium-term view, I have always been one of the sceptics with regard to the “globalisation = low inflation”-paradigm, notwithstanding the fact that the notion of “more globalisation equals lower inflation” is shared by many observers – or was, at least, shared by them until a few months ago. What is the underlying reason for this widespread assumption?
Evidently, since the beginning of the 1990s, the ongoing advance of globalisation has coincided with a marked decline in inflation rates and inflation volatility worldwide. It is not surprising that a causal interpretation has been given to these parallel developments with increased globalisation being seen as the agent that has driven down inflation rates.