Openness and Inflation
Year: 2007
Type: preprint
Abstract: This paper reviews the evidence on the relationship between openness and inflation. There is a robust negative relationship across countries, first documented by Romer (1993), between a country’s openness to trade and its long-run inflation rate. However, a key part of the standard explanation for this relationship - that central banks have a smaller incentive to engineer surprise inflations in more-open economies because the Phillips curve is steeper - seems at odds with the facts. While the United States is still not a very open economy by conventional measures, there are channels through which global developments may influence the nation’s inflation. We document evidence that global resource utilization may play a role in U.S. inflation and suggest avenues for future research.
Source: SSRN Electronic Journal
Authors: Mark A. Wynne, Erasmus Kersting
Institutions: Federal Reserve Bank of Dallas, Villanova University
Language: English
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1553315649