Volume 67, Issue 3 -

Globalization influences inflation and the transmission channels of monetary policy in various ways. The effects of globalization on the ability of monetary policy to control inflation have been discussed intensively. However, in the light of recent experiences following the global financial crisis with extended periods of disinflation in many advanced economies, the question whether the ability of monetary policy to control inflation has suffered significantly from increasing globalization has received new relevance. Based on a review of the literature, this paper discusses whether globalization is reducing the ability of central banks to control inflation and draws conclusion for the current situation in the euro area. We find that globalization has made it more complicated for central banks to ensure price stability and that it has tended to reduce the ability of monetary policy to control inflation in the short- to medium-run. However, in principle the ECB is still able to control inflation but may have to tolerate deviations from its inflation target for somewhat longer periods.

This short article underlines the efficiency considerations reflected by a Laffer curve. In a static context in which inflation is assumed away, the Laffer curve describes what would the response of tax revenue to tax rate change be under increasing inflation if there were allocative efficiency, i. e. given perfect competition and full-employment output. The link between market structure and state of economic activity thus emerges as a critical determinant of the shape of Laffer curve. Under imperfect competition, the entire Laffer curve would reflect how the business “leadership” having emanated from the prevailing market structure, uses taxation as a means of higher profit earning capacity.

Economists use three types of models to describe volunteer labour supply: the public-goods model, the private-consumption model, and the human-capital model. We used data from an online survey questionnaire of volunteers working for the German Red Cross to study the extent to which utility components representing these three types help to explain volunteer labour supply. We analysed the survey data using boosted regression trees, where we controlled for several other potentially important socioeconomic correlates of volunteer labour supply. We used measures of relative influence and partial dependence plots to analyse the strength and the direction of the correlation of the utility components and the other socioeconomic variables with volunteer labour supply.

The effective federal funds rate is determined in a competitive interbank market, while the target federal funds rate represents a policy variable. This paper proposes a theory of the determination of the effective funds rate. According to the main result, the latter is a Lagrange multiplier that vanishes if excess reserves emerge. This is exactly what happened in the United States in September 2008. A final section considers interest on reserves.