Capital Mobility and the Output-Inflation Tradeoff

Assaf Razin, Prakash Loungani and Chi-Wa Yuen

No 2000/087, IMF Working Papers from International Monetary Fund

Abstract: Identifying determinants of the output-inflation tradeoff has long been a key issue in business cycle research. We provide evidence that in countries with greater restrictions on capital mobility, a given reduction in the inflation rate is associated with a smaller loss in output. This result is shown to be consistent with theoretical presumption from a version of the Mundell-Fleming model. Restrictions on capital mobility are measured using the IMF’s Annual Report on Exchange Rate Arrangements and Exchange Restrictions. Estimates of the output-inflation tradeoff are taken from previous studies, viz., Lucas (1973) and Ball, Mankiw and Romer (1988).

Keywords: WP; Phillips curve; Output-inflation tradeoff; capital mobility; capital controls; openness; immobility case; price level; mobility regime; aggregate demand elasticity; capital immobility; Real exchange rates; Inflation; Neoclassical theory; Trade balance; Africa (search for similar items in EconPapers)
Pages: 22
Date: 2000-05-01
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Related works:
Journal Article: Capital mobility and the output-inflation tradeoff (2001)
Working Paper: Capital Mobility and the Output-Inflation Tradeoff (1997)
Working Paper: Capital mobility and the output-inflation tradeoff (1997)
Working Paper: Capital Mobility and the Output-Inflation Tradeoff (1996)
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