Format of Original
22 p.; 24 cm
Open Economies Review
Original Item ID
doi: 10.1007/s11079-014-9317-9; Shelves: HB 1 .O68 2015 v. 26, Memorial Periodicals
During the past two decades, a growing body of research has explored the implications of increased trade and financial openness for the relationship between output and inflation. This paper reviews proposed theoretical channels through which the degree of openness might ultimately affect the output-inflation trade-off and surveys the empirical studies that have sought to determine the net effect of greater openness on this trade-off. In addition, the paper utilizes a single cross-country data set to evaluate, taking into account recent developments in the literature, the likely sign and significance of this net effect. In particular, we find current data imply that there is a negative and significant relationship between openness and the sacrifice ratio, regardless of the transmission channel that is proposed.