Determination of inflation in an open economy Phillips curve framework: the case of developed and developing Asian countries

This paper estimates a structural New Keynesian model to test whether globalization has changed the behavior of U.S. macroeconomic variables. Several key coefficients in the model–such as the slopes of the Phillips and IS curves, the sensitivities of domestic inflation and output to “global” output, and so forth–are allowed in the estimation to depend on the extent of globalization (modeled as the changing degree of openness to trade of the economy), and, therefore, they become time-varying. The empirical results indicate that globalization can explain only a small part of the reduction in the slope of the Phillips curve. The sensitivity of U.S. inflation to global measures of output may have increased over the sample, but it remains very small. The changes in the IS curve caused by globalization are similarly modest. Globalization does not seem to have led to an attenuation in the effects of monetary policy shocks. The nested closed-economy specification still appears to provide a substantially better fit of U.S. data than various open-economy specifications with time-varying degrees of openness. Some time variation in the model coefficients over the postwar sample exists, particularly in the volatilities of the shocks, but it is unlikely to be related to globalization.

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Recent Economic Trends in Sri Lanka

Journal of Southeast Asian Studies ◽

10.1017/s0022463400010961 ◽

1983 ◽

Vol 14 (2) ◽

pp. 262-265 ◽

Cited By ~ 1

Author(s):

Richard Hooley

Keyword(s):

Economic Growth ◽

Sri Lanka ◽

Open Economy ◽

Economic Performance ◽

Small Open Economy ◽

Economic Structure ◽

Asian Countries ◽

The Past ◽

Economic Trends ◽

Southeast Asian Countries

While Sri Lanka is geographically closer to India, there are greater similarities in economic structure with many Southeast Asian countries. Sri Lanka is a small open economy. Foreign trade has always played a pivotal role in the functioning of the economy. Politically the country has exhibited a preference for democratic parliamentary forms of government, which are compatible with an underlying cultural individualism. There are important differences, however, in both the tempo and direction of economic growth over the past two decades, and these differences, along with the underlying policy strategies that produced them, are potentially instructive in any consideration of economic performance in the region.

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AN OPEN-ECONOMY NEW KEYNESIAN PHILLIPS CURVE: EVIDENCE FROM HONG KONG

Pacific Economic Review ◽

10.1111/j.1468-0106.2005.00271.x ◽

2005 ◽

Vol 10 (2) ◽

pp. 261-277 ◽

Cited By ~ 13

Author(s):

Hans Genberg ◽

Laurent L. Pauwels

Keyword(s):

Hong Kong ◽

Open Economy ◽

Phillips Curve ◽

New Keynesian ◽

New Keynesian Phillips Curve

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Fairness, Search Frictions, and Offshoring

The B E Journal of Economic Analysis & Policy ◽

10.1515/bejeap-2012-0056 ◽

2013 ◽

Vol 13 (1) ◽

pp. 137-172 ◽

Cited By ~ 2

Author(s):

Devashish Mitra ◽

Priya Ranjan

Keyword(s):

Wage Inequality ◽

Open Economy ◽

Closed Economy ◽

Skilled Workers ◽

Unemployment Rates ◽

Unskilled Workers ◽

Fairness Concerns ◽

The Cost ◽

The Impact

Abstract: Fairness considerations are introduced into the determination of wages in a two factor Pissarides-style model of search unemployment to study its implications for the unemployment rates of unskilled and skilled workers in both the closed economy case and when the economy can offshore some inputs. Both fairness concerns and offshoring of jobs done by unskilled workers create the overhiring effect for skilled workers. An increase in the concern for fairness in the closed economy increases the cost of hiring unskilled workers and increases the unemployment rates of both types of workers; however, wage inequality decreases. In the open economy case, an increase in the concern for fairness leads to greater offshoring which prevents skilled unemployment from increasing, but the unemployment of unskilled workers increases. A reduction in the cost of offshoring also increases offshoring and increases the unemployment of unskilled workers, but has a positive effect on skilled workers. Due to the presence of an overhiring effect in the hiring of skilled workers for both offshoring and non-offshoring firms, skilled workers experience higher wages and lower unemployment. The opposite movements in skilled and unskilled unemployment render the net effect ambiguous. Even though wage inequality increases, the impact on the wages of unskilled workers is ambiguous.

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