Openness, imported commodities and the Phillips Curve

Andrew Pickering and Hector Valle ()

Bristol Economics Discussion Papers from School of Economics, University of Bristol, UK

Abstract: This paper derives a Phillips curve with imported commodities as an additional input in the production process. Given greater reliance on exogenously priced imported commodities in production then changes in output lead to a reduced impact on marginal costs and prices. The Phillips curve becomes flatter relative to the bench-mark New Keynesian case. Empirical evidence supports the hypothesis that greater imported commodity intensity in production increases the sacrifice ratio. Econometrically controlling for imported commodity intensity also doubles the explanatory power of openness in determining the sacrifice ratio, as conjectured by Romer (1993).

Keywords: openness; imported commodities; sacrifice ratio (search for similar items in EconPapers)
JEL-codes: E31 E32 F41 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2008-10
New Economics Papers: this item is included in nep-cba, nep-mac and nep-opm
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:bri:uobdis:08/608

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