IDEAS home Printed from https://ideas.repec.org/a/mcb/jmoncb/v42y2010i2-3p267-287.html
   My bibliography  Save this article

Openness and Inflation

Author

Listed:
  • DUDLEY COOKE

Abstract

This 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.

Suggested Citation

  • Dudley Cooke, 2010. "Openness and Inflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(2-3), pages 267-287, March.
  • Handle: RePEc:mcb:jmoncb:v:42:y:2010:i:2-3:p:267-287
    as

    Download full text from publisher

    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1538-4616.2009.00287.x
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Andrea Mattozzi, 2008. "Can we insure against political uncertainty? Evidence from the U.S. stock market," Public Choice, Springer, vol. 137(1), pages 43-55, October.
    2. Erik Snowberg & Justin Wolfers & Eric Zitzewitz, 2007. "Partisan Impacts on the Economy: Evidence from Prediction Markets and Close Elections," The Quarterly Journal of Economics, Oxford University Press, vol. 122(2), pages 807-829.
    3. David K. Musto & Bilge Yilmaz, 2003. "Trading and Voting," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 990-1003, October.
    4. Fotios Siokis & Panayotis Kapopoulos, 2007. "Parties, Elections And Stock Market Volatility: Evidence From A Small Open Economy," Economics and Politics, Wiley Blackwell, vol. 19(1), pages 123-134, March.
    5. Gartner, Manfred & Wellershoff, Klaus W., 1995. "Is there an election cycle in American stock returns?," International Review of Economics & Finance, Elsevier, vol. 4(4), pages 387-410.
    6. Glosten, Lawrence R. & Milgrom, Paul R., 1985. "Bid, ask and transaction prices in a specialist market with heterogeneously informed traders," Journal of Financial Economics, Elsevier, vol. 14(1), pages 71-100, March.
    7. Andrea Mattozzi, 2010. "Policy Uncertainty, Electoral Securities, And Redistribution," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(1), pages 45-71, February.
    8. Kittel, Bernhard & Winner, Hannes, 2002. "How reliable is pooled analysis in political economy? The globalization welfare state nexus revisited," MPIfG Discussion Paper 02/3, Max Planck Institute for the Study of Societies.
    9. Glosten, Lawrence R & Jagannathan, Ravi & Runkle, David E, 1993. " On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks," Journal of Finance, American Finance Association, vol. 48(5), pages 1779-1801, December.
    10. Fredrik Carlsen & Elin F. Pedersen, 1999. "Rational Partisan Theory: Evidence for Seven OECD Economies," Economics and Politics, Wiley Blackwell, vol. 11(1), pages 13-32, March.
    11. Wilson, Sven E. & Butler, Daniel M., 2007. "A Lot More to Do: The Sensitivity of Time-Series Cross-Section Analyses to Simple Alternative Specifications," Political Analysis, Cambridge University Press, vol. 15(02), pages 101-123, March.
    12. Poole, Keith T & Romer, Thomas & Rosenthal, Howard, 1987. "The Revealed Preferences of Political Action Committees," American Economic Review, American Economic Association, vol. 77(2), pages 298-302, May.
    13. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
    14. repec:cup:apsrev:v:97:y:2003:i:02:p:311-331_00 is not listed on IDEAS
    15. Niklas Potrafke, 2009. "Did globalization restrict partisan politics? An empirical evaluation of social expenditures in a panel of OECD countries," Public Choice, Springer, vol. 140(1), pages 105-124, July.
    16. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    17. Robert Engle, 2001. "GARCH 101: The Use of ARCH/GARCH Models in Applied Econometrics," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 157-168, Fall.
    18. Karpoff, Jonathan M, 1986. " A Theory of Trading Volume," Journal of Finance, American Finance Association, vol. 41(5), pages 1069-1087, December.
    19. David P. Baron, 1989. "Service-Induced Campaign Contributions and the Electoral Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 104(1), pages 45-72.
    20. Andersen, Torben G, 1996. " Return Volatility and Trading Volume: An Information Flow Interpretation of Stochastic Volatility," Journal of Finance, American Finance Association, vol. 51(1), pages 169-204, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Laura Povoledo, 2017. "Modelling the sectoral allocation of labour in open economy models," Canadian Journal of Economics, Canadian Economics Association, vol. 50(3), pages 685-710, August.
    2. Igor Da Silva Veiga & Helder Ferreira De Mendonça, 2014. "Financial Openness And Inflationtargeting: An Analysis For The Unpleasant Fiscal Arithmetic," Anais do XL Encontro Nacional de Economia [Proceedings of the 40th Brazilian Economics Meeting] 059, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
    3. de Mendonça, Helder Ferreira & da Silva Veiga, Igor, 2014. "A Note On Openness And Inflation Targeting: Implications For The Unpleasant Fiscal Arithmetic," Macroeconomic Dynamics, Cambridge University Press, vol. 18(05), pages 1187-1207, July.
    4. 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.
    5. HAMI Mahyar, 2014. "Inflation And Openness: Empirical Evidences From Iran (1965-2010)," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 9(2), pages 27-32, August.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mcb:jmoncb:v:42:y:2010:i:2-3:p:267-287. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.