IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

The Small Open-Economy New Keynesian Phillips Curve: Empirical Evidence and Implied Inflation Dynamics

  • Alexander Mihailov

    ()

    (School of Economics, University of Reading)

  • Fabio Rumler

    ()

    (Economic Analysis Division, Oesterreichische Nationalbank)

  • Johann Scharler

    ()

    (Department of Economics, University of Linz)

This paper applies GMM estimation to assess empirically the small open-economy New Keynesian Phillips Curve derived in Galí and Monacelli (2005). We obtain a testable specification where fluctuations in the terms of trade enter explicitly, thus allowing a comparison of the relevance of domestic versus external determinants of CPI inflation dynamics. For most countries in our sample the expected relative change in the terms of trade emerges as a more relevant inflation driver than the contemporaneous domestic output gap. Overall, our results indicate some, albeit moderate, support for the tested relationship based on data from ten OECD countries typically classified as open economies.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.henley.reading.ac.uk/nmsruntime/saveasdialog.asp?lID=33145&sID=119847
Our checks indicate that this address may not be valid because: 404 Not Found (http://www.henley.reading.ac.uk/nmsruntime/saveasdialog.asp?lID=33145&sID=119847 [301 Moved Permanently]--> http://www.henley.ac.uk/nmsruntime/saveasdialog.asp?lID=33145&sID=119847). If this is indeed the case, please notify (Ed Quick)


Download Restriction: no

Paper provided by Henley Business School, Reading University in its series Economics & Management Discussion Papers with number em-dp2008-63.

as
in new window

Length: 25 pages
Date of creation: 15 Nov 2008
Date of revision:
Handle: RePEc:rdg:emxxdp:em-dp2008-63
Contact details of provider: Postal: PO Box 218, Whiteknights, Reading, Berks, RG6 6AA
Phone: +44 (0) 118 378 8226
Fax: +44 (0) 118 975 0236
Web page: http://www.henley.reading.ac.uk/
More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Argia M. Sbordone, 2001. "Prices and Unit Labor Costs: A New Test of Price Stickiness," Departmental Working Papers 200112, Rutgers University, Department of Economics.
  2. Gali, Jordi & Gertler, Mark & David Lopez-Salido, J., 2005. "Robustness of the estimates of the hybrid New Keynesian Phillips curve," Journal of Monetary Economics, Elsevier, vol. 52(6), pages 1107-1118, September.
  3. 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.
  4. Argia M. Sbordone, 2005. "Do expected future marginal costs drive inflation dynamics?," Staff Reports 204, Federal Reserve Bank of New York.
  5. Campbell Leith & Jim Malley, 2003. "Estimated Open Economy New Keynesian Phillips Curves for the G7," CESifo Working Paper Series 834, CESifo Group Munich.
  6. Olivier J. Blanchard & Jordi Galí, 2005. "Real wage rigidities and the New Keynesian model," Proceedings, Board of Governors of the Federal Reserve System (U.S.).
  7. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  8. Kenneth Rogoff, 2003. "Globalization and global disinflation," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 45-78.
  9. Rudd, Jeremy & Whelan, Karl, 2005. "New tests of the new-Keynesian Phillips curve," Journal of Monetary Economics, Elsevier, vol. 52(6), pages 1167-1181, September.
  10. Frederic S. Mishkin, 2008. "Globalization, Macroeconomic Performance, and Monetary Policy," NBER Working Papers 13948, National Bureau of Economic Research, Inc.
  11. Jeremy Rudd & Karl Whelan, 2005. "Modelling inflation dynamics: a critical review of recent research," Finance and Economics Discussion Series 2005-66, Board of Governors of the Federal Reserve System (U.S.).
  12. Argia M. Sbordone, 2007. "Globalization and Inflation Dynamics: the Impact of Increased Competition," NBER Working Papers 13556, National Bureau of Economic Research, Inc.
  13. Frederic S. Mishkin, 2007. "Inflation Dynamics," International Finance, Wiley Blackwell, vol. 10(3), pages 317-334, December.
  14. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
  15. Michael Woodford, 2007. "Globalization and Monetary Control," NBER Chapters, in: International Dimensions of Monetary Policy, pages 13-77 National Bureau of Economic Research, Inc.
  16. repec:rdg:wpaper:em-dp2007-52 is not listed on IDEAS
  17. Jeremy Rudd & Karl Whelan, 2003. "Can rational expectations sticky-price models explain inflation dynamics?," Finance and Economics Discussion Series 2003-46, Board of Governors of the Federal Reserve System (U.S.).
  18. William R White, 2008. "Globalisation and the determinants of domestic inflation," BIS Working Papers 250, Bank for International Settlements.
  19. Claudio E. V. Borio & Andrew Filardo, 2007. "Globalisation and inflation: New cross-country evidence on the global determinants of domestic inflation," BIS Working Papers 227, Bank for International Settlements.
  20. Gali, Jordi & Gertler, Mark & David Lopez-Salido, J., 2003. "Erratum to "European inflation dynamics": [European Economic Review 45 (2001), 1237-1270]," European Economic Review, Elsevier, vol. 47(4), pages 759-760, August.
  21. Benigno, Gianluca & Benigno, Pierpaolo, 2008. "Exchange rate determination under interest rate rules," Journal of International Money and Finance, Elsevier, vol. 27(6), pages 971-993, October.
  22. Fabio Rumler, 2005. "Estimates of the Open Economy New Keynesian Phillips Curve for Euro Area Countries," Working Papers 102, Oesterreichische Nationalbank (Austrian Central Bank).
  23. Stephen McKnight & Alexander Mihailov, 2007. "Re-examining the Importance of Trade Openness for Aggregate Instability," Economic Analysis Research Group Working Papers earg-wp2007-12, Henley Business School, Reading University.
  24. Laurence M. Ball, 2006. "Has Globalization Changed Inflation?," NBER Working Papers 12687, National Bureau of Economic Research, Inc.
  25. Jordi Gali & Mark Gertler & J. David Lopez-Salido, 2001. "European Inflation Dynamics," NBER Working Papers 8218, National Bureau of Economic Research, Inc.
  26. 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.
  27. Jordi Gal� & Tommaso Monacelli, 2005. "Monetary Policy and Exchange Rate Volatility in a Small Open Economy," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 707-734.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:rdg:emxxdp:em-dp2008-63. 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: (Ed Quick)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.