Globalization and the Output-Inflation Tradeoff: New Time Series Evidence

S.C.W. Eijffinger, Z. Qian

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Abstract

Recent cross-country studies on the globalization and output-inflation tradeoff correlation find openness has no significant effect on OECD countries. Those studies assume parameter constancy across countries. In this paper, we argue that this assumption does not hold for major industrialized countries. Using individual time series analysis, we find the effect of openness on the output-inflation trade off differ in sign and size across countries. In contrast to previous cross-country studies, we find globalization has significantly changed some major industrialized countries’ output inflation tradeoff. This has important implications for future theoretical and empirical research.
Original languageEnglish
Place of PublicationTilburg
PublisherEBC
Number of pages25
Volume2010-04
Publication statusPublished - 2010

Publication series

NameEBC Discussion Paper
Volume2010-04

Keywords

  • openness
  • output-inflation tradeoff
  • Phillips curve
  • time inconsistency theory

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