The "New Keynesian" Phillips Curve: Closed Economy vs. Open Economy

Assaf Razin and Chi-Wa Yuen

No 8313, NBER Working Papers from National Bureau of Economic Research, Inc

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

JEL-codes: E1 F3 (search for similar items in EconPapers)
Date: 2001-06
New Economics Papers: this item is included in nep-pke
Note: IFM
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Citations: View citations in EconPapers (25)

Published as Razin, Assaf and Chi-Wa Yuen. "The 'New Keynesian' Phillips Curve: Closed Economy Versus Open Economy," Economics Letters, 2002, v75(1,Mar), 1-9.

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