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The Open Economy Phillips Curve: 'New Keynesian' Theory and Evidence

Author

Listed:
  • Loungani, Prakash
  • Razin, Assaf
  • Yuen, Chi-Wa

Abstract

The Paper derives an open economy New-Keynesian Phillips curve. The Phillips curve depends on growth in the domestic economy excess capacity, differential growth between foreign output and domestic output, and on the surprise depreciation of the real exchange rate. The Paper provides new evidence on the effect of globalization of the economy, in both the trade and capital transactions, in the Phillips curve. The evidence is consistent with the predictions of the theory.

Suggested Citation

  • Loungani, Prakash & Razin, Assaf & Yuen, Chi-Wa, 2002. "The Open Economy Phillips Curve: 'New Keynesian' Theory and Evidence," CEPR Discussion Papers 3582, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:3582
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    More about this item

    Keywords

    imperfect competition in the product market; new Keynesian Phillips curve; Phillips curve; sacrifice ratios; strategic interactions among price setters;

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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