To quote Chairman Bernanke: ‘‘Further progress in global economic integration should not be taken for granted…as in the past, the social and political opposition to openness can be strong… much of it arises because changes in the patterns of production are likely to threaten the livelihoods of some workers and the profits of some firms…The natural reaction of those so affected is to resist change, for example, by seeking the passage of protectionist measures’’ (Jackson Hole, 2006).
In brief, the unfolding path of global economic integration and consequently, preferences for open economies are beset with unknown uncertainties. In this broader setting, let us look at the emerging challenges to monetary policy. First, considerations relating to maximising output and employment weigh as much upon monetary authorities as maintaining price stability, particularly in the developing countries.