individual short runs in which pressures in labor and product markets help to shape price dynamics. in the world in which we live, it seems natural to expect, as others have argued, that the greater integration of product and financial markets would have exerted some downward pressure on inflation. i cannot look back at the experience in the united states over the past decade without discerning the imprint of such forces. the opening up of china and india, in particular, represents a potentially huge increase in the global supply of mainly lower - skilled workers. and it is clear that the low cost of production in these and other emerging economies has led to a geographic shift in production toward them ; from a u. s. perspective, the ratio of imported goods to domestically produced goods has risen noticeably in recent years. however, the extent of the disinflationary forces let loose by this shift in the pace of globalization is less obvious. the united states is more open, but it is also large in size and scope. many u. s. goods and most services are still produced domestically with little competition from abroad. in addition, the significant expansion of production in china and elsewhere has put substantial upward pressure on the prices of oil and other commodities, many of which are imported for use as inputs to production in the united states. while we can point to types of goods for which prices are restrained by forces from abroad, the net effects of globalization on domestic inflation of all goods and services need not even be negative, especially in today ’ s environment of strong global growth. one challenge in assessing the effect of increased globalization is the paucity of empirical research on this issue, which is understandable given the shortness of the span over which these forces have these views are my own and not necessarily those of other members of the board of governors and the federal open market committee. been particularly acute. nevertheless, the existing research does highlight several channels through which globalization might have helped to hold down domestic inflation in recent years. these channels include the direct and indirect effects on domestic inflation of lower import prices, a heightened sensitivity of domestic inflation to foreign demand conditions and perhaps less sensitivity to domestic demand conditions, downward pressure on domestic wage growth, and upward pressure on domestic productivity growth. let me summarize the empirical evidence from work on u. s. inflation my colleagues and i have done at the federal reserve board, as well as from our readings of other studies. in the united states, the increase in core import prices since the mid

ms. rivlin discusses how economists might be helpful in the current and upcoming macroeconomic policy process remarks by the vice chairman of the board of governors of the us federal reserve system, ms. alice m. rivlin, at the annual meeting of the eastern economic association in washington, d. c. on 4 / 4 / 97. i am delighted to be here today with such a large group of my fellow economists. economists are a very diverse group, but they share a basic kit of analytical tools that shape the way they approach problems. economists share a useful shorthand vocabulary - - sometimes disparaged by others as jargon - - that makes it easier to communicate with each other. they share a sense of what kinds of things are known about how economies work and, far more important, an appreciation for how much is not known about the workings of any complex human system, including the economy in which we are all living and working right now. most importantly, economists share a sense of excitement that others often find hard to fathom, about unraveling the many puzzles that abound in economic analysis. at the moment, as a relatively new governor of the federal reserve, i am particularly glad to be in a group of economists, because i can be quite sure they don ’ t share the popular stereotype of a fed governor. this stereotype has several elements : any fed governor or central banker is an inflation freak who thinks reducing inflation should be the only objective of monetary policy and a zero inflation economy would be heaven. any central banker has a firm view of exactly what growth rate the economy ought not to exceed and how high the unemployment rate ought to be to avoid inflation - - that something called the nairu is engraved on a stone tablet somewhere high on a mountain top and all we have to do is find it. moreover, this stereotypical central banker knows exactly what monetary policy ought to be in order to keep the economy on the desired track. this stereotype leads otherwise quite intelligent members of the press to believe that if central bankers don ’ t reveal this secret blueprint, it ’ s because they are being deliberately obscure and inscrutable. the media ’ s sacred calling is to interpret what central bankers really meant but out of sheer perversity did not choose to say. so it ’ s a pleasure to be in a room full of economists who know that : while the fed has access to all the latest statistics and an excellent staff to analyze them, it has not