In a quarterly IMF publication, Rogoff, now an economics professor at Harvard University, argued that globalisation has helped fight inflation by increasing competition, which has raised overall output and made prices more flexible.

He said global inflation had dropped to under 4 per cent from around 30 per cent a year in the early 1990s.

"If the trend toward greater globalisation were to reverse -- say, if heightened conflict made international shipping much more difficult and expensive -- the benefits of increased trade and competition could be reversed, leading to a sharp increase in inflation," he wrote in the IMF's December issue of Finance and Development published on Friday.

Critics of globalisation -- who say that the liberalised flow of capital and jobs across borders makes the rich richer and the poor poorer -- have held protests around the globe at meetings of international bodies such as the World Trade Organisation and the International Monetary Fund.

Rogoff noted that the last great area of globalisation -- between 1870 and 1910 -- ended with the outbreak of World War One, which led to the breakdown of the gold standard and curbed trade. Global trade did not recover until after World War Two, he added.

Rogoff argued that the only defense to keep global inflation -- which measures the average aggregate rate of increase of national prices across all countries -- at bay was to rely on improvements in central bank institutions.

"Central banks must recognise that an adverse supply shock may temporarily lead to deflation but be alert to the threat that, over the medium term, it can lead instead to inflation," he said.

The IMF should therefore, advocate greater central bank autonomy and urge members to stay alert to the risk of inflation, even in the present very low inflation environment.

"Some day the technological and political forces that have been leading to greater economic competition will almost surely run in reverse for a period.

"When this happens, markets will quickly separate the wheat from the chaff," he added.

Rogoff said countries that used the present benign inflation environment to strengthen their institutions will be able to weather the storm, while those that didn't may be vulnerable.