The 'New Keynesian' Phillips Curve: Closed Economy vs. Open Economy
13 Pages Posted: 11 Oct 2001
Date Written: September 28, 2001
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.
Keywords: Phillips curve, new Keynesian, trade, capital mobility
JEL Classification: E12, F41
Suggested Citation: Suggested Citation