Does globalisation affect economic stability? And if so, how? The
interest of the book is in supposed effects of globalisation on
macroeconomic volatility. Globalisation in economic terms can be defined
as international integration of goods and factor markets. During the
last decades, goods trade and financial flows have risen strikingly.
Macroeconomic volatility can refer to several aggregates such as output
and its components, prices and employment. During the "Great
Moderation", variability of economic growth and inflation rates has
changed significantly. The first part focuses on the possible effect of
international goods market integration on output volatility. Three
candidate mechanisms are theoretically introduced and empirically
tested. Those channels relate to external risk, offshoring and sudden
stops. The second part describes other potential determinants of output
volatility, such as the international integration of financial markets,
monetary and fiscal policy, and shocks. Each determinant is
theoretically described and empirically revised. The importance of
globalisation relative to other sources in affecting output volatility
is evaluated. The summarised findings of the analysis: A careful thesis
about effects of globalisation on output volatility should be
differentiated along several dimensions. Firstly, globalisation of goods
and financial markets must be distinguished. Secondly, even for
international goods trade various mechanisms affect the volatility of
output differently. Thirdly, for each channel the direction and weight
of the effect depend on country characteristics. In a conclusion the
author offers alternative ways of interpretation for economic policy.
