As a result, the effect of tightening the monetary policy on the aggregate demand has been significantly contained due to lack of response from long-term interest rates. In the world of global financial markets nobody seems to be surprised by the fact that during the session of the Federal Open Market Committee (FOMC 19 ) of the American Federal Reserve, the eyes of the entire financial market are fixed on its Chairman. Why is that? Decisions made by the FOMC in Washington are equally as important for investors in New York as those in London, Tokyo, Rio de Janeiro, Shanghai or even Warsaw. Not only do the FOMC decisions influence US economy, but also - via the financial markets channel - the entire global economy. An unexpected increase in interest rates in the USA may bring about a sudden outflow of capital from the emerging markets, and thus weaken the currencies of those countries and increase their bond yields. Some economists 20 make the point that an important aspect of the growing internationalisation of financial markets is increased discipline, which is extorted by investors on governments and central banks in individual countries. According to this hypothesis, the financial markets, through their continuous valuation of securities, duly reward good and punish bad economic policies. However, the empirical results do not provide hard evidence to support the thesis on fiscal policy discipline.
This global, common factor explains not only the change in the inflation trend (the increasing inflation between 1960 and 1980 and its subsequent decrease), but also inflation fluctuation over a business cycle. The research has also shown that, where domestic inflation deviates from the “global” inflation, it exhibits a “global-inflation-reverting” tendency. As a consequence, modelling and forecasting of domestic inflation may be improved significantly by taking into account the “global inflation”. The fast-progressing globalisation is closely related to offshoring and outsourcing, whose scope is also growing. Unfortunately there is not much hard data that would allow for assessment of the scale of the phenomenon. Offshoring analysis is available only for selected countries and covers only selected industries. However, the growing scale of the phenomenon is reflected by data on global trade in goods and services and on foreign direct investment. Over the past 15 years, the shares of individual regions in the global trade have changed significantly, whereby the decreasing share of the EU is accompanied by increasing shares of the developing countries, including the Asian countries. Globally, foreign trade expressed as percentage of the GDP increased from the average 19% of the GDP between 1980 and 1989 up to 25% between 2000 and 2004. Table 1.