Technological progress, globalization and low-inflation: Evidence from the United States

Area of Science:

• Economics
• Macroeconomics
• Monetary Policy

Background:

• Core inflation in developed economies has remained below target since the late 1990s, exacerbated by the global financial crisis.
• Factors contributing to low inflation include commodity prices, oil supply, and weak aggregate demand.
• Technology and globalization are increasingly recognized as significant drivers of inflation dynamics.

Purpose of the Study:

• To quantify the impact of technology and globalization on inflation in the United States.
• To analyze the evolving roles of technology and globalization in shaping inflation trends.
• To provide a new perspective on understanding persistent low inflation.

Main Methods:

• Utilized an extended hybrid New Keynesian Phillips Curve (NKPC) model.
• Quantified the contribution of technology and globalization variables to U.S. inflation.
• Analyzed inflation dynamics over the past two decades.

Main Results:

• Technology and globalization effectively explain low inflation dynamics in the U.S.
• The influence of globalization on domestic inflation has diminished over the last 20 years.
• The impact of technology on inflation has progressively increased during the same period.
• Technology currently plays a more significant role than globalization in U.S. low-inflation trends.

Conclusions:

• Technology and globalization are key determinants of persistent low inflation in the U.S.
• The increasing impact of technology suggests a structural shift in inflation drivers.
• Findings offer a novel framework for analyzing low inflation in the U.S. and other developed regions.