Implications of globalization for monetary policy

This paper argues that the implications of globalization for monetary policy come mainly through two channels:

• the many structural changes that are associated with the globalization process cause an increase in the uncertainty surrounding monetary policy. This leads to increased uncertainty as to how to interpret macroeconomic data/indicators and about the monetary transmission mechanism
• alternatively, by strengthening the process of global economic integration, globalization increases international competition, thereby forcing market players to make structural adjustments or reforms that change the conditions or constraints under which monetary policy is implemented