IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/8313.html
   My bibliography  Save this paper

The "New Keynesian" Phillips Curve: Closed Economy vs. Open Economy

Author

Listed:
  • Assaf Razin
  • Chi-Wa Yuen

Abstract

The paper extends Woodford's (2000) analysis of the closed economy Phillips curve to an open economy with both commodity trade and capital mobility. We show that consumption smoothing, which comes with the opening of the capital market, raises the degree of strategic complementarity among monopolistically competitive suppliers, thus rendering prices more sticky and magnifying output responses to nominal GDP shocks.

Suggested Citation

  • Assaf Razin & Chi-Wa Yuen, 2001. "The "New Keynesian" Phillips Curve: Closed Economy vs. Open Economy," NBER Working Papers 8313, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:8313
    Note: IFM
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w8313.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, December.
    2. Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, vol. 77(4), pages 647-666, September.
    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.
    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. Assaf Razin, 2004. "Globalization and Disinflation: A Note," NBER Working Papers 10954, National Bureau of Economic Research, Inc.
    2. Bouakez, Hafedh, 2005. "Nominal rigidity, desired markup variations, and real exchange rate persistence," Journal of International Economics, Elsevier, vol. 66(1), pages 49-74, May.
    3. Alon Binyamini & Assaf Razin, 2008. "Inflation-Output Tradeoff As Equilibrium Outcome of Globalization," Israel Economic Review, Bank of Israel, vol. 6(1), pages 109-134.
    4. Assaf Razin, 2004. "Aggregate Supply and Potential Output," NBER Working Papers 10294, National Bureau of Economic Research, Inc.
    5. Takhtamanova, Yelena F., 2010. "Understanding changes in exchange rate pass-through," Journal of Macroeconomics, Elsevier, vol. 32(4), pages 1118-1130, December.
    6. Bowdler, Christopher, 2009. "Openness, exchange rate regimes and the Phillips curve," Journal of International Money and Finance, Elsevier, vol. 28(1), pages 148-160, February.
    7. Fabio Ghironi, 2002. "Endogenously persistent output dynamics: A puzzle for the sticky-price model?," Boston College Working Papers in Economics 527, Boston College Department of Economics.
    8. Assaf Razin & Prakash Loungani, 2005. "US Monetary Policy Announcements and the Term Structure of Interest Rate Differentials: Evidence from Hong Kong and Singapore," Working Papers 102005, Hong Kong Institute for Monetary Research.
    9. Joseph Plasmans & Jacob Engwerda & Bas Van Aarle & Tomasz Michalak & Giovanni Di Bartolomeo, 2006. "Macroeconomic Stabilization Policies In The Emu: Spillovers, Asymmetries And Institutions," Scottish Journal of Political Economy, Scottish Economic Society, vol. 53(4), pages 461-484, September.
    10. Juan F. Castro, 2004. "On the Reasons Behind Fear of Floating: Pass-through Effects vs. Contractionary Depreciations," Econometric Society 2004 Latin American Meetings 268, Econometric Society.
    11. Marco Antonio Vega de la Cruz & Diego Winkelried Quezada, 2004. "El efecto arrastre de la inflación mundial en economías pequeñas y abiertas," Premio de Banca Central Rodrigo Gómez / Central Banking Award "Rodrigo Gómez", Centro de Estudios Monetarios Latinoamericanos, CEMLA, number prg2004, July-Dece.
    12. Charles R. Bean, 2006. "Impact of globalization on monetary policy : commentary," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 307-313.
    13. Yuen Chi-Wa, 2002. "Openness And The Output-Inflation Tradeoff: Floating Vs. Fixed Exchange Rates," International Economic Journal, Taylor & Francis Journals, vol. 16(4), pages 1-26.
    14. Marco Antonio Vega de la Cruz & Diego Winkelried Quezada, 2004. "The Dragging Effect of World Inflation in Small Open Economies," Premio de Banca Central Rodrigo Gómez / Central Banking Award "Rodrigo Gómez", Centro de Estudios Monetarios Latinoamericanos, CEMLA, number prg2004eng, July-Dece.
    15. Razin, Assaf & Loungani, Prakash, 2005. "Globalization and Disinflation: The Efficiency Channel," CEPR Discussion Papers 4895, C.E.P.R. Discussion Papers.
    16. Argia M. Sbordone, 2007. "Globalization and Inflation Dynamics: The Impact of Increased Competition," NBER Chapters, in: International Dimensions of Monetary Policy, pages 547-579, National Bureau of Economic Research, Inc.
    17. Assaf Razin & Alon Binyamini, 2007. "Flattened Inflation-Output Tradeoff and Enhanced Anti-Inflation Policy: Outcome of Globalization?," NBER Working Papers 13280, National Bureau of Economic Research, Inc.
    18. Marco Vega & Diego Winkelried, 2004. "How Does Global Disinflation Drag Inflation in Small Open Economies?," Macroeconomics 0403008, University Library of Munich, Germany.
    19. Assaf Razin & Prakash Loungani, 2005. "Globalization and Inflation-Output Tradeoffs," NBER Working Papers 11641, National Bureau of Economic Research, Inc.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Assaf Razin, 2004. "Aggregate Supply and Potential Output," NBER Working Papers 10294, National Bureau of Economic Research, Inc.
    2. Razin, Assaf & Yuen, Chi-Wa, 2002. "The 'New Keynesian' Phillips curve: closed economy versus open economy," Economics Letters, Elsevier, vol. 75(1), pages 1-9, March.
    3. Federico Etro & Andrea Colciago, 2010. "Endogenous Market Structures and the Business Cycle," Economic Journal, Royal Economic Society, vol. 120(549), pages 1201-1233, December.
    4. Enrique Martínez García, 2008. "Globalization and monetary policy: an introduction," Globalization Institute Working Papers 11, Federal Reserve Bank of Dallas.
    5. N. Gregory Mankiw & Ricardo Reis, 2003. "What Measure of Inflation Should a Central Bank Target?," Journal of the European Economic Association, MIT Press, vol. 1(5), pages 1058-1086, September.
    6. Fender, John & Yip, Chong K., 2000. "Tariffs and exchange rate dynamics redux," Journal of International Money and Finance, Elsevier, vol. 19(5), pages 633-655, October.
    7. Benigno, Pierpaolo, 2002. "A simple approach to international monetary policy coordination," Journal of International Economics, Elsevier, vol. 57(1), pages 177-196, June.
    8. Luís Costa, 2006. "Entry and fiscal policy effectiveness in a small open economy within a Monetary Union," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 5(1), pages 45-65, May.
    9. Giovanni Ganelli, 2008. "Public Spending Management and Macroeconomic Interdependence," Open Economies Review, Springer, vol. 19(2), pages 241-259, April.
    10. Andrea Vaona, 2015. "The price-price Phillips curve in small open economies and monetary unions: theory and empirics," International Economics and Economic Policy, Springer, vol. 12(2), pages 281-307, June.
    11. Haiwen Zhou, 2010. "A Ricardian model of international trade with oligopolistic competition," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 19(4), pages 499-515.
    12. Neiss, Katharine S, 1999. "Discretionary Inflation in a General Equilibrium Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(3), pages 357-374, August.
    13. Obstfeld, Maurice & Rogoff, Kenneth, 2000. "New directions for stochastic open economy models," Journal of International Economics, Elsevier, vol. 50(1), pages 117-153, February.
    14. Lane, Philip R., 2001. "The new open economy macroeconomics: a survey," Journal of International Economics, Elsevier, vol. 54(2), pages 235-266, August.
    15. Etro, Federico, 2017. "Research in economics and macroeconomics," Research in Economics, Elsevier, vol. 71(3), pages 373-383.
    16. Kenneth Kletzer, 2006. "Taxes and stabilization in contemporary macroeconomic models," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 13(4), pages 351-371, August.
    17. Charles Engel & Akito Matsumoto, 2009. "The International Diversification Puzzle When Goods Prices Are Sticky: It's Really about Exchange-Rate Hedging, Not Equity Portfolios," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(2), pages 155-188, July.
    18. Markus Knell, 2002. "Wage Formation in Open Economies and the Role of Monetary and Wage-Setting Institutions," Working Papers 63, Oesterreichische Nationalbank (Austrian Central Bank).
    19. Stepanyan Ara & Tevosyan Anahit, 2008. "A small open economy model with remittances: Evidence from Armenian economy," EERC Working Paper Series 08/06e, EERC Research Network, Russia and CIS.
    20. Oliver Grimm & Stefan Ried, 2007. "Macroeconomic Policy in a Heterogeneous Monetary Union," CER-ETH Economics working paper series 07/67, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.

    More about this item

    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • F3 - International Economics - - International Finance

    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:nbr:nberwo:8313. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.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.