Capital Mobility and the Output-Inflation Tradeoff
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Summary:
Identifying determinants of the output-inflation tradeoff has long been a key issue in business cycle research. We provide evidence that in countries with greater restrictions on capital mobility, a given reduction in the inflation rate is associated with a smaller loss in output. This result is shown to be consistent with theoretical presumption from a version of the Mundell-Fleming model. Restrictions on capital mobility are measured using the IMF’s Annual Report on Exchange Rate Arrangements and Exchange Restrictions. Estimates of the output-inflation tradeoff are taken from previous studies, viz., Lucas (1973) and Ball, Mankiw and Romer (1988).
Series:
Working Paper No. 2000/087
Subject:
Balance of payments Capital controls Economic theory Foreign exchange Inflation International trade Neoclassical theory Prices Real exchange rates Trade balance
English
Publication Date:
May 1, 2000
ISBN/ISSN:
9781451851014/1018-5941
Stock No:
WPIEA0872000
Pages:
22
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