Template-type: ReDIF-Paper 1.0
Author-Name: Jean-Marc Natal
Author-Name-First: Jean-Marc
Author-Name-Last: Natal
Author-Person: pna258
Author-Name: Dr. Nicolas Stoffels
Author-Name-First: Nicolas
Author-Name-Last: Stoffels
Author-Person: pst682
Title: Globalization, markups and the natural rate of interest
Abstract: In this paper, we investigate how, in a stylised theoretical framework, an increase in the degree of globalization - modelled as a deline in trade costs - affects the real natural rate of interest by impacting firms markups. Outlining a two- country dynamic general equilibrium model with endogenous elasticity of substitution between goods, we suggest two main propositions: 1) Globalization - via the impplied variation in markups - has a potentially significant impact on the natural rate of interest. 2) Simple, plausible markup dynamics may have contributed to explain the recent "conundrum" of world interest rates.
Length: 37 pages
Creation-Date: 2007
Contact-Email: forschung@snb.ch
File-URL: https://www.snb.ch/en/publications/research/working-papers/2007/working_paper_2007_14
File-Format: text/html
Number: 2007-14
Classification-JEL: E43, F15, F41, F49
Keywords: globalization, natural interest rate, trade costs
Handle: RePEc:snb:snbwpa:2007-14