Discussion paper

DP3083 The 'New Keynesian' Phillips Curve: Closed Economy versus Open Economy

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

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Citation

Razin, A and C Yuen (2001), ‘DP3083 The 'New Keynesian' Phillips Curve: Closed Economy versus Open Economy‘, CEPR Discussion Paper No. 3083. CEPR Press, Paris & London. https://cepr.org/publications/dp3083