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Capital mobility and inflation persistence: theory and evidence from Greece

Author Info

Listed author(s):
  • Costas Karfakis

    (University of, Macedonia, Greece)

  • Demetrios Moschos

    (University of Athens, Greece)

  • Moïse Sidiropoulos

Abstract

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/

Order Information: Web: http://jws-edcv.wiley.com/jcatalog/JournalsCatalogOrder/JournalOrder?PRINT_ISSN=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. Thomas J. Sargent, 1981. "Stopping moderate inflations: the methods of Poincaré and Thatcher," Working Papers 1, Federal Reserve Bank of Minneapolis.
  3. Loungani, Prakash & Razin, Assaf & Yuen, Chi-Wa, 2001. "Capital mobility and the output-inflation tradeoff," Journal of Development Economics, Elsevier, vol. 64(1), pages 255-274, February.
  4. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
  5. Mankiw, N Gregory, 1990. "A Quick Refresher Course in Macroeconomics," Journal of Economic Literature, American Economic Association, vol. 28(4), pages 1645-1660, December.
  6. McCallum, Bennett T., 1983. "On non-uniqueness in rational expectations models : An attempt at perspective," Journal of Monetary Economics, Elsevier, vol. 11(2), pages 139-168.
  7. Guy Debelle & Stanley Fischer, 1994. "How independent should a central bank be?," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 38, pages 195-225.
  8. Dornbusch, Rudiger & Fischer, Stanley, 1993. "Moderate Inflation," World Bank Economic Review, World Bank Group, vol. 7(1), pages 1-44, January.
  9. Gruben, William C. & McLeod, Darryl, 2002. "Capital account liberalization and inflation," Economics Letters, Elsevier, vol. 77(2), pages 221-225, October.
  10. Jordan, Thomas J., 1999. "Central bank independence and the sacrifice ratio," European Journal of Political Economy, Elsevier, vol. 15(2), pages 229-255, June.
  11. 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.
  12. 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.
  13. 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 1254-1275, December.
  14. Andreas Fischer, 1996. "Central bank independence and sacrifice ratios," Open Economies Review, Springer, vol. 7(1), pages 5-18, January.
  15. 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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Cited by:

  1. Roy Cerqueti & Mauro Costantini & Luciano Gutierrez, 2009. "New panel tests to assess inflation persistence," Working Papers 54-2009, Macerata University, Department of Finance and Economic Sciences, revised Oct 2009.

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