The 'New Keynesian' Phillips Curve: Closed Economy versus Open Economy

Assaf Razin and Chi-Wa Yuen

No 3083, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: 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 monopolistic competitive suppliers, thus rendering prices more sticky and magnifying output responses to nominal GDP shocks.

Keywords: Phillips curve; New keynesian; Trade; Capital mobility (search for similar items in EconPapers)
JEL-codes: E12 F41 (search for similar items in EconPapers)
Date: 2001-11
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Citations: View citations in EconPapers (10)

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