The Open Economy Phillips Curve: 'New Keynesian' Theory and Evidence

Assaf Razin, Chi-Wa Yuen and Prakash Loungani

No 3582, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: 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.

Keywords: Sacrifice ratios; Phillips curve; New keynesian phillips curve; Strategic interactions among price setters; Imperfect competition in the product market (search for similar items in EconPapers)
JEL-codes: E12 F41 (search for similar items in EconPapers)
Date: 2002-10
New Economics Papers: this item is included in nep-ifn and nep-mac
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Citations: View citations in EconPapers (4)

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