U.K. Inflation and Relative Prices over the Last Decade: How Important was Globalization?

August 1, 2007

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

In this paper, the IMF's new Global Economy Model (GEM) is used to estimate the relative importance of a number of factors argued to explain the differences in the trends in core inflation and relative prices in the United Kingdom, the Euro Area and the United States. The simulation results indicate that while the direct effect of globalization has had a larger effect in the United Kingdom than in either the United States or the Euro Area, it explains only a portion of the developments and U.K. specific factors played an important role.

Subject: Exchange rates, Imports, Inflation, Productivity, Real effective exchange rates

Keywords: nontradable goods, relative price, service price inflation, U.K. consumption bundle, U.K. distribution, U.K. economy, WP

Pages:
28
Volume:
2007
DOI:
https://doi.org/10.5089/9781451867725.001
Issue:
208
Series:
Working Paper No. 2007/208
Stock No:
WPIEA2007208
ISBN:
9781451867725
ISSN:
1018-5941

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