frederic s mishkin : globalization, macroeconomic performance, and monetary policy speech by mr frederic s mishkin, member of the board of governors of the us federal reserve system, at the domestic prices in an integrated world economy conference, board of governors of the federal reserve system, washington dc, 27 september 2007. the original speech, which contains various links to the documents mentioned, can be found on the us federal reserve system ’ s website. * * * in recent years, globalization has become one of the hottest topics, not only for the general public but also for central bankers. 1 some commentators have gone so far as to claim that greater openness of economies to flows of goods, services, capital, and businesses from other nations invalidate traditional economic models of inflation, which take little account of globalization. in the long run, monetary policy strives to achieve price stability, which contributes to maximum sustainable employment and economic growth. in the shorter run, we at the federal reserve aim to achieve our dual mandate of not only stabilizing prices but also reducing the volatility of output and employment around their maximum sustainable levels. globalization affects the ability of monetary policy makers to stabilize prices and output in two ways : ( 1 ) through its effects on the behavior of inflation and output and ( 2 ) through its effects on the ways in which monetary policy influences inflation and output – that is, on the monetary transmission mechanism. i will look at each in turn and will then use the analysis to address another important issue for monetary policy makers : has globalization been a key driver of improvements in inflation performance and the decline in inflation that we have been seeing throughout the world? ( please note that my comments here reflect my own views and not necessarily those of others on the board of governors or the federal open market committee. ) globalization and inflation we should never forget milton friedman's adage that " inflation is always and everywhere a monetary phenomenon. " in the long run, as long as a central bank has an independent monetary policy – that is, it is not locked into a fixed - exchange - rate regime in which its hands are tied – the rate of inflation is determined by monetary policy. globalization, however, can have an effect on the incentives for central banks to control inflation and, more directly, on inflation developments in the short and medium runs. kenneth rogoff ( 2003 ) argues that globalization has led to greater price flexibility, which has reduced the ability of central banks to use inflation surprises to boost

we are actively considering, in terms of whether choices are being well explained, or well understood, or are really adding value. empowering consumers to make informed choice so, what is required to ensure consumers are empowered to make informed choices in a world of increasing choice and complexity? at the central bank we would see three complementary aspects necessary to ensure consumers are well equipped to make decisions in their own best interest. to be informed you need information of course – but that is not enough : that information needs to be presented in a way that seeks to effectively inform consumers – meaning it needs to be clear and easy to understand ; consumers on the other hand need to be equipped with sufficient financial literacy to be able to use that information effectively ; and consumers themselves must also take on the responsibility to inform themselves – including reasonable time and care to read and understand information, to ensure they are making decisions in their own best interests. in terms of informing effectively, new standard for business in the revised consumer protection code should make firms'obligations clearer in this regard. these will place a duty on financial services firms to consider their overall approach to communicating consumer information, to make sure it supports consumers to make effective, timely and informed decisions. a firm's overall approach should not be about simply'providing information'to meet their regulatory disclosure obligations, but should also be about ensuring practical understanding by the consumer, so that they can take decisions that are in their best interests. in terms of financial literacy, we very much welcome and will support the government's national financial literacy strategy. along with the government, the hia, the competition and consumer protection commission and other stakeholders, we are keen to play our role in developing and implementing initiatives that seek to improve the overall level of financial literacy of irish citizens, and to provide valuable information for consumers to understand and to compare financial products. while this will take time to produce results, it is a key means of empowering consumers to make the right choices. once equipped by firms with the right information, in the right way, and once equipped with the financial literacy to understand and assess that information, then it is up to consumers themselves to sufficiently inform themselves and to make their own decisions. how the central bank is strengthening its approach consumer protection 3 / 5 bis - central bankers'speeches i spoke earlier of the increasingly complex and interconnected financial sector, the growing pace of digitalisation and the development of new, innovative business models. all of this is reshaping the risk context of the