Openness and the Output-Inflation Tradeoff
Christopher Bowdler
Abstract
Standard open economy models predict that openness to trade should exert a positive effect on the slope of the output-inflation tradeoff, or Phillips curve, but such a proposition finds very little support in the existing empirical literature. We propose a new test of this hypothesis based on new measures of the slope of the Phillips curve and more general cross-country regression models. The results indicate some support for the standard theoretical prediction, but it is confined to those countries that have maintained floating exchange rate regimes.
Keywords: Openness, Inflation, Phillips curve
Date: November 2003 | Reference number(s): 2003-W04
Series: Nuffield College Economics Working Papers
JEL Classifications: E31, E32, F41