8 Kenneth Rogoff has agued that inflation becomes more responsive to domestic excess demand if price rigidities are reduced and the economy becomes more flexible as a result of increased competitive pressure induced by globalisation. The proposition that a measure of “global economic slack” rather than the domestic output gap is a more important determinant of domestic inflation pressure has been discussed extensively. This hypothesis, if valid, would imply that the slope of the short-term Phillips curve, which depicts the responsiveness of inflation to domestic excess demand, becomes flatter. 9 Thus, in a globalised world – so it has been argued – a much stronger monetary policy response would be required, other things being equal, to preserve price stability over the medium term in the presence of adverse shocks. But also in this regard there exists no robust empirical evidence or solid and convincing theoretical foundation to support the claim that a structural change has taken place. 10 Empirical estimates for the euro area do not show a significant change in the slope of the short-term Phillips curve. Furthermore, it would be misleading to interpret the recently observed low correlation between domestic output gaps and domestic inflation in some countries as a structural change in the short-term Phillips  6  See Kroszner (2007). 7  See Bean (2006a and 2006b). 8  See Rogoff (2004, 2006). 9  See Borio and Filardo (2007). 10  See Ihrig et al. (2007). BIS Review 9/2008  3  curves.
This has also served to reinforce the Government's objective to enhance the efficiency of the public delivery system. This collaboration has resulted in the acceptance of the use of cards including the ATM card, which also functions as a debit card, for over the counter services and the offering of payment services via Internet banking and the Internet-based Financial Process Exchange (FPX) payment system. Another initiative undertaken has been the review of the remittance and e-money regulatory framework to encourage the introduction of payment products that would cater for the unbanked and underserved communities such as migrant workers and consumers with low  2  BIS Review 69/2008  income and low financial literacy and who may have no alternative but to rely on informal payment service providers. There are now more than 20 new remittance and mobile payment products that have been launched. The Bank has already engaged the relevant stakeholders on the priority areas identified and welcomes any further industry efforts to address these issues. Given the significant pay-offs from the low cost technologies in accelerating the adoption of electronic payment, the mobile phone is identified as one of the delivery channels that should be leveraged on. Potential of mobile phones to make the transformation Bank Negara Malaysia sees tremendous promise in mobile telecommunication networks as an electronic payment channel since mobile phones are already in the hands of most Malaysians, with 88% of the Malaysian population subscribing to mobile phone services.