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Trade Openness, Capital Mobility, and the Sacrifice Ratio

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  • Joseph Daniels
  • David VanHoose

Abstract

This paper develops and evaluates empirically the implications of a theoretical model of an open economy in which variations in both trade openness and capital mobility can influence the sacrifice ratio. Key predictions forthcoming from the model are that both forms of globalization can independently affect the capital ratio, once the influences of the level of central bank independence and the degree of wage stickiness in nations� economies are taken into account. Examination of cross-country data encompassing 58 disinflations for 16 countries yields evidence consistent with these essential predictions of the theoretical framework.
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  • Joseph Daniels & David VanHoose, 2009. "Trade Openness, Capital Mobility, and the Sacrifice Ratio," Open Economies Review, Springer, vol. 20(4), pages 473-487, September.
    • Handle: RePEc:kap:openec:v:20:y:2009:i:4:p:473-487
    DOI: 10.1007/s11079-008-9093-5
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    Citations

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    Cited by:

    1. Igor Da Silva Veiga & Helder Ferreira De Mendonça, 2014. "Financial Openness And Inflationtargeting: An Analysis For The Unpleasant Fiscal Arithmetic," Anais do XL Encontro Nacional de Economia [Proceedings of the 40th Brazilian Economics Meeting] 059, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    2. Daniels, Joseph P. & VanHoose, David D., 2013. "Exchange-rate pass through, openness, and the sacrifice ratio," Journal of International Money and Finance, Elsevier, vol. 36(C), pages 131-150.
    3. Badinger, Harald, 2009. "Globalization, the output-inflation tradeoff and inflation," European Economic Review, Elsevier, vol. 53(8), pages 888-907, November.
    4. Goran Petrevski, 2023. "Macroeconomic Effects of Inflation Targeting: A Survey of the Empirical Literature," Papers 2305.17474, arXiv.org.
    5. Andrea Vaona, 2015. "The price-price Phillips curve in small open economies and monetary unions: theory and empirics," International Economics and Economic Policy, Springer, vol. 12(2), pages 281-307, June.
    6. Martin Stojanovikj & Goran Petrevski, 2024. "Inflation targeting and disinflation costs in Emerging Market economies," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 51(1), pages 283-312, February.
    7. Pickering Andrew & Valle Héctor A., 2012. "Openness, Imported Commodities and the Sacrifice Ratio," The B.E. Journal of Macroeconomics, De Gruyter, vol. 12(1), pages 1-26, March.
    8. Magkonis, Georgios & Zekente, Kalliopi-Maria, 2020. "Inflation-output trade-off: Old measures, new determinants?," Journal of Macroeconomics, Elsevier, vol. 65(C).
    9. Huang, Ho-Chuan & Yeh, Chih-Chuan & Wang, Xiuhua, 2019. "Inflation targeting and output-inflation tradeoffs," Journal of International Money and Finance, Elsevier, vol. 96(C), pages 102-120.
    10. Harald Badinger & Elisabeth Nindl, 2012. "Sacrifice Ratios, Benefice Ratios, and Globalization: Evidence from a New Set of Estimates," Economics Bulletin, AccessEcon, vol. 32(1), pages 421-428.
    11. Watson, Anna, 2016. "Trade openness and inflation: The role of real and nominal price rigidities," Journal of International Money and Finance, Elsevier, vol. 64(C), pages 137-169.
    12. Petrevski, Goran, 2023. "Macroeconomic Effects of Inflation Targeting: A Survey of the Empirical Literature," EconStor Preprints 271122, ZBW - Leibniz Information Centre for Economics.

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    More about this item

    Keywords

    Trade openness; Capital mobility; Sacrifice ratio; F40; F41; F43;
    All these keywords.

    JEL classification:

    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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