Monetary Policy Case Study

Global Inflationary Trends: Rising Pressure on Central Banks

OR

Abstract:
From the last two decades of the 20th century, as more and more developing nations opened up the economies, their rapid growth and demand for resources has worried major central banks. In the process of feeding these economies with massive resources, global economy has been grappling with inflationary concerns. Business is no more normal for central bankers. They are forced to deal with domestic inflation, whose cause of which is entangled with global trade - riddling enough to engage the central bankers for long. Economists feel that the central banks are exposed to a tricky situation where they are not allowed to alter the direction and pattern of foreign trade - the cause: but will have to come in terms with domestic inflation - the effect.This case study helps analyse the effects of globalisation on inflation in the world economy. The case will also help in debating the alternatives available for central banks to deal with the effects of global inflation on their respective economies.

Pedagogical Objectives:

• To know why countries involve in trade and the impact of integrating an economy with global economy
• To discuss the effect of globalisation on the decisions of central banks, especially in dealing with inflationary pressures.

Keywords : Globalisation, Factors helping the process of Globalisation, Inflation, Real and Nominal Wages, Real and Nominal Interest Rates, General Price Level, Global Trade, Offshoring and Outsourcing, Phases of Globalisation, Government's Role in a Global Economy, Fiscal Policy Case Study, Inflation and Interest Rate Dynamics, Central Bank's Role in a Global Inflation, Global Trade in Services, Monetary Policy