The Open Economy Phillips Curve: 'New Keynesian' Theory and Evidence
International Monetary Fund (IMF)
Tel Aviv University - Eitan Berglas School of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)
University of Hong Kong - School of Economics and Finance
CEPR Discussion Paper No. 3582
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.
Number of Pages in PDF File: 27
Keywords: Sacrifice ratios, Phillips curve, new Keynesian Phillips curve, strategic interactions among price setters, imperfect competition in the product market
JEL Classification: E12, F41working papers series
Date posted: December 4, 2002
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