Özet:

After rising in the 1970s, inflation rates began to decline in the 1980s and remained low until mid-2021, when the Covid-19 pandemic decelerated. This price stability also coincides with the period when the phenomenon of globalization accelerated. This has triggered the debate about the impact of globalization on inflation and the effectiveness of monetary policy. Economic theory argues that inflation and monetary policy transmission mechanism are affected by globalization. The aim of this study is to seek answers to the questions of "how does globalization affect the inflationary effect of monetary expansion and inflation rates". For this purpose, the data of 39 developing countries for the period 2000-2020 are analyzed with dynamic panel data methods. According to the results of the System Generalized Method of Moments (GMM) estimator, the increase in both trade globalization and financial globalization causes inflation rates to decrease. On the other hand, globalization increases the inflationary effect of a monetary expansion. In the study, similar results were obtained in the analyzes made with different measures of globalization. According to these results, globalization affects inflation dynamics and monetary policy transmission mechanism. Therefore, central banks need to consider external factors in their decision-making processes.

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