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Capital mobility and inflation persistence: theory and evidence from Greece

  • Costas Karfakis

    (University of, Macedonia, Greece)

  • Demetrios Moschos

    (University of Athens, Greece)

  • Moïse Sidiropoulos

This paper examines the relationship between the openness of the capital account and inflation persistence. In the theoretical part we find that in a fixed (floating) exchange rate regime inflation persistence is negatively (positively) associated with the intensity of capital controls. In the empirical part of the paper we analyse the dynamics of the inflation rate in Greece by associating inflation persistence with the capital account openness and we find evidence in favour of a positive relationship. Copyright © 2004 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/ijfe.236
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Article provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics.

Volume (Year): 9 (2004)
Issue (Month): 2 ()
Pages: 125-133

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Handle: RePEc:ijf:ijfiec:v:9:y:2004:i:2:p:125-133
DOI: 10.1002/ijfe.236
Contact details of provider: Web page: http://www.interscience.wiley.com/jpages/1076-9307/

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  1. David Romer, 1993. "Openness and Inflation: Theory and Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 108(4), pages 869-903.
  2. Mankiw, N Gregory, 1990. "A Quick Refresher Course in Macroeconomics," Journal of Economic Literature, American Economic Association, vol. 28(4), pages 1645-60, December.
  3. Alogoskoufis, George S & Smith, Ron, 1991. "The Phillips Curve, the Persistence of Inflation, and the Lucas Critique: Evidence from Exchange-Rate Regimes," American Economic Review, American Economic Association, vol. 81(5), pages 1254-75, December.
  4. Loungani, P. & Eazin, A. & Yuen, C.W., 1996. "Capital Mobility and the Output-Inflation Tradeoff," Papers 38-96, Tel Aviv.
  5. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
  6. Guy Debelle & Stanley Fischer, 1994. "How independent should a central bank be?," Working Papers in Applied Economic Theory 94-05, Federal Reserve Bank of San Francisco.
  7. Dornbusch, Rudiger & Fischer, Stanley, 1993. "Moderate Inflation," World Bank Economic Review, World Bank Group, vol. 7(1), pages 1-44, January.
  8. Andreas Fischer, 1996. "Central bank independence and sacrifice ratios," Open Economies Review, Springer, vol. 7(1), pages 5-18, January.
  9. Jordan, Thomas J., 1999. "Central bank independence and the sacrifice ratio," European Journal of Political Economy, Elsevier, vol. 15(2), pages 229-255, June.
  10. Bennett T. McCallum, 1981. "On Non-Uniqueness in Rational Expectations Models: An Attempt at Perspective," NBER Working Papers 0684, National Bureau of Economic Research, Inc.
  11. Gruben, William C. & McLeod, Darryl, 2002. "Capital account liberalization and inflation," Economics Letters, Elsevier, vol. 77(2), pages 221-225, October.
  12. Robert J. Gordon, 1982. "Why Stopping Inflation May Be Costly: Evidence from Fourteen Historical Episodes," NBER Chapters, in: Inflation: Causes and Effects, pages 11-40 National Bureau of Economic Research, Inc.
  13. Thomas J. Sargent, 1981. "Stopping moderate inflations: the methods of Poincaré and Thatcher," Working Papers 1, Federal Reserve Bank of Minneapolis.
  14. repec:nbr:nberre:0126 is not listed on IDEAS
  15. Laurence Ball & N. Gregory Mankiw & David Romer, 1988. "The New Keynsesian Economics and the Output-Inflation Trade-off," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 1-82.
  16. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
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