The paper in the spotlight this week is by Sandra Eickmeier and Markus Kühnlenz from the Deutsche Bundesbank in Frankfurt and is a reminder how economic concerns shift over time.
Written in 2013 the paper addresses the issue of how much China contributes to inflation elsewhere in the world? Remember then commodity prices rode high and people were concerned by the presence of, not as today the lack of, inflation in their respective systems.
The work is achingly thorough and involves harvesting data from 38-countries for the period 2002~2011. The conclusions though are simple. China accounted, over the period, for around 5% of inflation globally. In some countries the effect was as much as 13% and, somewhat unsurprisingly, the closer a country is to China (broadly speaking) the bigger the effect.
Although the paper may lack direct relevance today it serves as a useful reminder the global economy is connected in ways we only barely understand. Governments would have citizens believe otherwise. American politicians alone can fix American problems, French theirs, and so on.
The world is so interconnected though the notion (to me at least) of narrow national economic agenda’s being able to address interconnected global issues* is one that belongs to the world of steam engines and suffragettes; but its one that persists seemingly stronger than ever.
The paper can be accessed in full via the following link China’s Role in Global Inflation Dynamics.
Happy Sunday
[*A good example. The Central Bank of my birth country reduced interest rates last week by 25-basis points and announced other plans to gee it’s economy up with the Governor saying at the time “Through the actions taken today … we have improved the economic outcomes for this country. There will be less unemployment, more activity, and there will be a greater prospect of a successful adjustment to the new realities that the UK faces,” Shazaam! Better than doing nothing probably; but seriously?]