Openness and Inflation
AbstractThis paper develops a two-country general equilibrium model to analyze the optimal rate of inflation under discretion. When agents' welfare is the sole policy objective it is possible to show that openness and inflation no longer have a simple inverse relationship. Because the terms of trade are related to monopoly markups, a greater degree of openness may lead the policymaker to exploit the short-run Phillips curve more aggressively, even if it involves a smaller short-run benefit. Inflation can then be higher in a more open economy. Copyright (c) 2010 The Ohio State University.
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Bibliographic InfoArticle provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.
Volume (Year): 42 (2010)
Issue (Month): 2-3 (03)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879
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- Povoledo, Laura, 2012. "Modelling the sectoral allocation of labour in open economy models," MPRA Paper 40344, University Library of Munich, Germany.
- Jafari Samimi, Ahmad & Ghaderi, Saman & Hosseinzadeh, Ramezan & Nademi, Younes, 2012. "Openness and inflation: New empirical panel data evidence," Economics Letters, Elsevier, vol. 117(3), pages 573-577.
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