Openness, imported commodities and the Phillips Curve
AbstractThis paper derives a Phillips curve with imported commodities as an additional input in the production process. Given greater reliance on exogenously priced imported commodities in production then changes in output lead to a reduced impact on marginal costs and prices. The Phillips curve becomes flatter relative to the bench-mark New Keynesian case. Empirical evidence supports the hypothesis that greater imported commodity intensity in production increases the sacrifice ratio. Econometrically controlling for imported commodity intensity also doubles the explanatory power of openness in determining the sacrifice ratio, as conjectured by Romer (1993).
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Bibliographic InfoPaper provided by Department of Economics, University of Bristol, UK in its series Bristol Economics Discussion Papers with number 08/608.
Length: 29 pages
Date of creation: Oct 2008
Date of revision:
openness; imported commodities; sacrifice ratio;
Find related papers by JEL classification:
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-11-25 (All new papers)
- NEP-CBA-2008-11-25 (Central Banking)
- NEP-MAC-2008-11-25 (Macroeconomics)
- NEP-OPM-2008-11-25 (Open Economy Macroeconomic)
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