that globalisation has not changed the rules of the game for stability - oriented central banks. globalisation : basic characteristics to start off, let me briefly restate some basic observations with respect to globalisation. notwithstanding the widespread use of the term “ globalisation ”, there is neither a single definition of what globalisation actually means nor a single key figure for measuring its scale and evolution over time. in my view, a useful working definition of the term “ globalisation ” is that, quite fundamentally, it describes the ongoing process of the international division of labour. in the wake of this process, the domestic markets for goods and services, as well as the labour markets, are becoming more and more interlinked and interdependent internationally. the process of globalisation has been evolving among developed countries for many decades now. therefore, in contrast to what some observers might think, the current process of globalisation per se is neither new nor particularly unique. rather, it is the logical outcome of efforts to further exploit the benefits of the division of labour on an international scale. however, the pace of this process has been increasing rapidly for more than a decade now. declining costs of telecommunication and transportation have been the main drivers of this development. there have, moreover, been considerable improvements in skill levels in many regions of the world as well as in the product quality of goods and services that are produced in formerly rather underdeveloped countries. additionally, what has changed the face of globalisation is the fact that globalisation nowadays extends to a larger group of countries than in the past. more and more countries which used to have rather closed economies have opened themselves to the world market. thus, new players have entered on to the global stage and are becoming increasingly relevant economic powers and, as a result, competitors to established developed countries. as a consequence, the process of globalisation is leading to a shift in weights in the global economy. this shift is nothing exceptional. in fact, it is a quite natural development, which simply reflects the continuously evolving global economic landscape. let me now come to the subject of globalisation and inflation. globalisation and inflation speaking on globalisation and monetary policy at the current juncture, i feel tempted to refer to the famous song by bob dylan “ the times they are a - changin ’ ”. one verse has several great lines of advice for economists : come writers and critics who prophesize with your pen … … … … … … … and don ’ t

speak too soon for the wheel ’ s still in spin … … … … … … … …. the loser now will be later to win for the times they are a - changin ’. it is only some months ago that a lot of writers and critics “ prophesized ” that, in an era of globalisation, inflation is, and should not be, a cause for concern among monetary policymakers. with the benefit of hindsight, though, they should have followed bob dylan ’ s advice : “ but don ’ t speak too soon, for the wheel is still in spin ”, as inflation has reappeared on a global scale. moreover, in the face of the global financial turbulence of the past months, the debate in the media has switched from being about a “ goldilocks environment ” to the inherent risks of entering a period of perceived stagflation. considering that “ the times they are a - changin ’ ”, as bob dylan put it, a medium - to longerterm perspective is of the essence. taking such a medium - term view, i have always been one of the sceptics with regard to the “ globalisation = low inflation ” - paradigm, notwithstanding the fact that the notion of “ more globalisation equals lower inflation ” is shared by many observers – or was, at least, shared by them until a few months ago. what is the underlying reason for this widespread assumption? evidently, since the beginning of the 1990s, the ongoing advance of globalisation has coincided with a marked decline in inflation rates and inflation volatility worldwide. it is not surprising that a causal interpretation has been given to these parallel developments with increased globalisation being seen as the agent that has driven down inflation rates. and, indeed, over the past ten years, price rises in manufacturing imports in the euro area have been rather subdued, thus dampening – other things being equal – the increase in the overall consumer price index. at first sight, this seems to support the view of “ opportunistic disinflation ” according to which globalisation has been a key factor in lowering inflation rates. however, the past few months, in particular, have shown that there are obvious reasons why many observers should have been more cautious before drawing such conclusions. in fact, globalisation does not necessarily only have a dampening effect on inflation. to the contrary, the opposite might be the case as well ; globalisation might be a major driver of inflationary pressures. the