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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)

  • Mo�se 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
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  1. David Romer, 1991. "Openness and Inflation: Theory and Evidence," NBER Working Papers 3936, National Bureau of Economic Research, Inc.
  2. Jordan, Thomas J., 1999. "Central bank independence and the sacrifice ratio," European Journal of Political Economy, Elsevier, vol. 15(2), pages 229-255, June.
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  4. Loungani, P. & Eazin, A. & Yuen, C.W., 1996. "Capital Mobility and the Output-Inflation Tradeoff," Papers 38-96, Tel Aviv.
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  8. Rudiger Dornbusch & Stanley Fischer, 1991. "Moderate Inflation," NBER Working Papers 3896, National Bureau of Economic Research, Inc.
  9. Assaf Razin & Prakash Loungani & Chi-Wa Yuen, 2000. "Capital Mobility and the Output-Inflation Tradeoff," IMF Working Papers 00/87, International Monetary Fund.
  10. 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.
  11. Andreas Fischer, 1996. "Central bank independence and sacrifice ratios," Open Economies Review, Springer, vol. 7(1), pages 5-18, January.
  12. N. Gregory Mankiw, 1990. "A Quick Refresher Course in Macroeconomics," NBER Working Papers 3256, National Bureau of Economic Research, Inc.
  13. Gruben, William C. & McLeod, Darryl, 2002. "Capital account liberalization and inflation," Economics Letters, Elsevier, vol. 77(2), pages 221-225, October.
  14. 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.
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  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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