Introduction

With a growing interconnectedness of economies through trade, production and financial market channels, globalisation has become an increasingly important phenomenon over the last decade. Indeed, more recently, the increased integration of economies across the globe in both financial and product markets related to the rapid growth of globalisation has also been associated with global financial turmoil and the highly internationally synchronised nature of the most recent global economic downturn. However, taking a longer-term perspective, what distinguishes the rapid growth of globalisation over the past decade has not been falling transport costs or tariffs alone – a process which has been ongoing for decades now – but rather new production paradigms enabled by both an expansion of global productive capacity and major technological changes facilitating the access and transfer of goods, services, people and knowledge across borders. In this sense, this latest acceleration of globalisation has been inextricably linked to technological change (and, accordingly, distinguishing between the impact of these two phenomena in practice is very difficult).

The rapidly changing world implied by these forces seems to have influenced a range of developments in advanced and emerging economies alike. This chapter takes a narrow view and focuses exclusively on gauging the macroeconomic impacts for the euro area, although in practice, globalisation has undoubtedly also had several other equally important implications – notably for financial markets and macroeconomic policies.