The Paper derives an open economy New-Keynesian Phillips curve. The Phillips curve depends on growth in the domestic economy excess capacity, differential growth between foreign output and domestic output, and on the surprise depreciation of the real exchange rate. The Paper provides new...

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...

Our paper analyses the effects of restrictions on capital mobility on the output-inflation tradeoff. Using a stochastic version of the Mundell-Fleming model, we establish a theoretical presumption that an increase in restrictions on capital mobility should make the tradeoff parameter smaller,...

A common feature for developing countries that have experienced a sharp drop in inflation without large output losses is the extensive use of capital controls. This study shows that capital controls significantly improve the sacrifice ratio. This element contributes to the explanation of small...

Optimal international taxation and its implications for convergence in long run income growth rates are analyzed in the context of an endogenously growing world economy with perfect capital mobility. Under tax competition (i) the residence principle will maximize national welfare; (ii) the...

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...

This paper considers the financing of investment in the presence of information asymmetry between "insiders" and "outsiders" of the firms. It establishes a well-defined capital structure for the economy as a whole with the following features: low-productivity firms rely on the equity market to...