, Volume 31, Issue 2–3, pp 163–184 | Cite as

Globalization, Financial Volatility and Monetary Policy

  • Helmut WagnerEmail author
  • Wolfram Berger


Recently it has often been claimed that globalization eases the job of central banks as it helps to tame inflation. This is used to argue that central banks (particularly the ECB, referring to the objectives as laid down in the EU Treaty) could or should reduce their efforts in the fight against inflation in favor of supporting the general economic policies of the governments. This paper takes a critical look at this argument, pointing to the structural changes associated with globalization and to the corresponding increase in uncertainty by which the central banks are affected. As an example of this, the increase in financial volatility is analyzed and explained as the result of optimal portfolio allocation, and its implications for monetary policy are discussed.

Globalization inflation volatility capital flows forecast error asset prices monetary policy 


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© Kluwer Academic Publishers 2004

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of HagenUniversitätsstrasse 41Germany

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