Ihrig, J., S. B. Kamin, D. Lindner and J. Marquez (2007), “Some Simple Tests of the Globalization and Inflation Hypothesis”, International Finance Discussion Papers No 891 (April), Board of Governors of the Federal Reserve System. IMF (2005), “How has globalization affected inflation?”, Chapter III, World Economic Outlook (April).
First, a long absorbed lesson is that, while things may work well if left to the invisible hand, during periods of stress that hand seems to lose its grip, in the words of Ahamed Liaquat in his Pulitzerwinning “Lords of Finance”. Policy makers around the world have learned their lessons from the Great Depression: a financial system in distress requires active central bank intervention.