The "New Keynesian" Phillips Curve: Closed Economy vs. Open Economy
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.
|Date of creation:||Jun 2001|
|Date of revision:|
|Publication status:||published as Razin, Assaf and Chi-Wa Yuen. "The 'New Keynesian' Phillips Curve: Closed Economy Versus Open Economy," Economics Letters, 2002, v75(1,Mar), 1-9.|
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- Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, vol. 77(4), pages 647-66, September.
- Loungani, Prakash & Razin, Assaf & Yuen, Chi-Wa, 1997.
"Capital Mobility and the Output-Inflation Tradeoff,"
CEPR Discussion Papers
1577, C.E.P.R. Discussion Papers.
- 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.
- Assaf Razin & Prakash Loungani & Chi-Wa Yuen, 2000. "Capital Mobility and the Output-Inflation Tradeoff," IMF Working Papers 00/87, International Monetary Fund.
- Prakash Loungani & Assaf Razin & Chi-Wa Yuen, 1997. "Capital mobility and the output-inflation tradeoff," International Finance Discussion Papers 577, Board of Governors of the Federal Reserve System (U.S.).
- Loungani, P. & Eazin, A. & Yuen, C.W., 1996. "Capital Mobility and the Output-Inflation Tradeoff," Papers 38-96, Tel Aviv.
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