Globalisation and inflation dynamics in Asia and the Pacific

BIS Papers No 70
February 2013

The Bank for International Settlements (BIS) organised a research workshop on globalisation and inflation dynamics in Asia and the Pacific on June 18-19 in Hong Kong SAR. The topic was endorsed by the Asian Consultative Council in February 2012 as the new monetary stability research theme for the two-year research programme of the BIS Representative Office for Asia and the Pacific. The conference venue was provided by the Hong Kong Monetary Authority.

The goal of the event was to bring together researchers and policymakers to present the latest developments in the research area of globalisation and inflation. The workshop also helped to sharpen the focus on the key aspects of this topic in the research programme of the BIS Asian office going forward. There were 34 participants, including academics, researchers and policymakers from central banks and international organisations from the Asia-Pacific region, Europe and the United States.

The workshop presentations revolved around five key themes: economic globalisation and inflation dynamics in the region; financial globalisation and its impact on exchange rate passthrough to inflation; the importance of commodity price swings; the difficulties measuring economic slack in small, open economies; and understanding how to interpret inflation expectation data from different sources. Emphasis was put on the changing economic and financial environment and the implications for monetary policymaking. In addition to presentations of research papers, the workshop included two high-level policy panel discussions focused on monetary policy challenges in the Asia-Pacific region.

There was a broad recognition among the central bankers and academics of the importance of this topic for Asia and the Pacific. The discussions identified various theoretical channels through which global developments influence domestic inflation dynamics. In addition to the theoretical channels, there were questions about how labour market dynamics in Asia, especially in China, are spilling over to the region and elsewhere, and how new supply chain relationships in the region can amplify the transmission of inflation shocks. Several presenters noted the deep conceptual and empirical challenges related to the measurement of economic slack in dynamic, open economies of the type in Asia. The event also cast new light on the debate on how monetary policy should respond to commodity price swings.

This volume is a collection of presentations during the workshop.

Session 1 - Measuring economic slack in emerging Asian economies

Session 2 - How important are inflation expectations in driving Asian inflation?

Session 3 - Understanding commodity price cycles in emerging Asia and their implications for monetary policy

Session 4 - Globalisation and inflation in Asia and the Pacific (I)

Session 5 - Globalisation and inflation in Asia and the Pacific (II)

Dinner address

Panel Discussion 1 - Conduct of monetary policy in Asia-Pacific in a volatile external environment

Panel Discussion 2 - Monetary policy frameworks in Asia-Pacific - beyond inflation targeting