IDEAS home Printed from https://ideas.repec.org/p/mrq/wpaper/0901.html
   My bibliography  Save this paper

Exchange-Rate Pass Through, Openness, Inflation, and the Sacrifice Ratio

Author

Listed:
  • Joseph P. Daniels

    (Center for Global and Economic Studies, Marquette University)

  • David D. VanHoose

    (Hanmaker School of Business, Baylor University)

Abstract

Considerable recent work has reached mixed conclusions about whether and how globalization affects the inflation-output trade-off and realized inflation rates. In this paper, we utilize cross-country data to provide evidence of interacting effects between a greater extent of exchange-rate pass through and openness to international trade as factors that we find both contribute to lower inflation. The interplay between the inflation effects of pass through and openness suggest that both factors may influence the terms of the output-inflation trade-off. We develop a simple theoretical model showing how both pass through and openness can interact to influence the sacrifice ratio, and we empirically explore the nature of the interplay between the two variables as factors influencing the sacrifice ratio. Our results indicate that a greater extent of pass through depresses the sacrifice ratio and that once the extent of pass through is taken into account alongside other factors that affect the sacrifice ratio, the degree of openness to international trade exerts an empirically ambiguous effect on the sacrifice ratio.

Suggested Citation

  • Joseph P. Daniels & David D. VanHoose, 2009. "Exchange-Rate Pass Through, Openness, Inflation, and the Sacrifice Ratio," Working Papers and Research 0901, Marquette University, Center for Global and Economic Studies and Department of Economics.
    • Handle: RePEc:mrq:wpaper:0901
    as

    Download full text from publisher

    File URL: http://www.busadm.mu.edu/mrq/workingpapers/wpaper0901.pdf
    File Function: First Version, 2008 Second Version, 2009
    Download Restriction: no
    ---><---

    Citations

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


    Cited by:

    1. Eijffinger, S.C.W. & Qian, Z., 2010. "Globalization and the Output-Inflation Tradeoff : New Time Series Evidence," Discussion Paper 2010-27, Tilburg University, Center for Economic Research.
    2. Eijffinger, Sylvester C.W. & Qian, Zongxin, 2016. "Trade openness and the Phillips curve: The neglected heterogeneity and robustness of empirical evidence," International Review of Economics & Finance, Elsevier, vol. 44(C), pages 13-18.

    More about this item

    Keywords

    Pass Through; Openness; Sacrifice Ratio;
    All these keywords.

    JEL classification:

    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:mrq:wpaper:0901. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Andrew G. Meyer (email available below). General contact details of provider: https://edirc.repec.org/data/ecomuus.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.