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Philip R Lane: International inflation co-movements (BIS, 7-page read) Lane believes three factors, namely economic globalisation (global value chains), financial globalisation (co-movements in credit cycle), and international migration flows have synchronised inflation globally. He further considers trends such as increasing digitalisation leading to divergence in the inflation co-movement in the future as service sectors grow (which are ‘less tradeable than manufacturing’).
Why inflation might follow the pandemic (FT, 6 min read) Martin Wolf believes that pandemic, just like war economy has led to an enormous increase in public spending and monetary loosening. But unlike wars, the probability of inflation rising in the UK is low due to different structural factors at play. His advice ‘Hedge against it. Do not bet your shirts on it.’
Monetary Policy Transmission: Borrowing Constraints Matter! (Bank Underground, 6 min read) Changes in interest rate is more potent if more households within the economy are indebted. ‘This is likely driven by the direct effect of consumption, but also an amplification from spending through to changes in firm and labour market behaviour – or what economists call general-equilibrium effects’.