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Full-Text Articles in Social and Behavioral Sciences
Implications Of Globalization For The Output-Inflation Relationship: An Assessment, Joseph P. Daniels, Sandeep Mazumder, David D. Vanhoose
Implications Of Globalization For The Output-Inflation Relationship: An Assessment, Joseph P. Daniels, Sandeep Mazumder, David D. Vanhoose
Economics Faculty Research and Publications
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 …
Exchange-Rate Pass Through, Openness, And The Sacrifice Ratio, Joseph P. Daniels, David D. Vanhoose
Exchange-Rate Pass Through, Openness, And The Sacrifice Ratio, Joseph P. Daniels, David D. Vanhoose
Economics Faculty Research and Publications
Considerable recent work has reached mixed conclusions about whether and how globalization affects the inflation–output trade-off and suggests that the ultimate effect of openness on the output–inflation relationship is influenced by a variety of factors. In this paper, we consider the impact of exchange-rate pass through and examine how pass through conditions the effect of openness on the sacrifice ratio. We develop a simple theoretical model showing how the extent of both pass through and openness can interact to influence the output–inflation relationship. Next we empirically explore the nature of these two variables and their interaction. Results indicate that greater …
Openness And The Efficiency Of Fdi: A Panel Stochastic Production Frontier Study, Farrokh Nourzad
Openness And The Efficiency Of Fdi: A Panel Stochastic Production Frontier Study, Farrokh Nourzad
Economics Faculty Research and Publications
This paper uses a stochastic translog production frontier to estimate technical inefficiency indices whose conditional mean is specified as a function of FDI and its interaction with openness of the economy. The model is estimated using an annual panel of 46 countries for the years, 1981–2001. The results suggest that increased FDI increases potential output in both developed and developing countries with the effect being more profound in the former. It is also found that increased FDI reduces technical inefficiencies the more open is the economy but that this effect holds only for developed economies. Thus qualified support is found …
Openness, The Sacrifice Ratio, And Inflation: Is There A Puzzle?, Joseph P. Daniels, David D. Vanhoose
Openness, The Sacrifice Ratio, And Inflation: Is There A Puzzle?, Joseph P. Daniels, David D. Vanhoose
Economics Faculty Research and Publications
The standard time-inconsistency-based explanation for the negative correlation between openness and inflation requires an inverse relationship between the sacrifice ratio and openness, but Daniels et al. (2005, Openness, central bank independence, and the sacrifice ratio. Journal of Money, Credit, and Banking 37 (2), 371–379.) have provided evidence that controlling for central bank independence reveals a positive relationship. This paper embeds the time-inconsistency approach within a model of a multisector, imperfectly competitive, open economy. In this setting, greater openness raises the sacrifice ratio but reduces the inflation bias. Thus, failure to observe an inverse relationship between openness and the sacrifice ratio …
Openness, Income-Tax Progressivity, And Inflation, Joseph P. Daniels, David D. Vanhoose
Openness, Income-Tax Progressivity, And Inflation, Joseph P. Daniels, David D. Vanhoose
Economics Faculty Research and Publications
This paper considers a model of an open economy in which the degree of income-tax progressivity influences the interaction among openness, central bank independence, and the inflation rate. Our model suggests that an increase in the progressivity of the tax system induces a smaller response in real output to a change in the price level. This implies that increased income-tax progressivity reduces the equilibrium inflation rate and that the effect of increased income-tax progressivity on inflation is smaller when the central bank places a higher weight on inflation or when there is greater openness. Examination of cross-country inflation data provides …
Openness, Centralized Wage Bargaining, And Inflation, Joseph P. Daniels, Farrokh Nourzad, David D. Vanhoose
Openness, Centralized Wage Bargaining, And Inflation, Joseph P. Daniels, Farrokh Nourzad, David D. Vanhoose
Economics Faculty Research and Publications
This paper develops a model of an open economy containing both sectors in which wages are market-determined and sectors with wage-setting arrangements. A portion of the latter group of sectors coordinate their wages, taking into account that their collective actions influence the equilibrium inflation outcome in an environment in which the central bank engages in discretionary monetary policymaking. Key predictions forthcoming from this model are (1) increased centralization of wage setting initially causes inflation to increase at low degrees of wage centralization but then, as wage centralization increases, results in an inflation drop-off; (2) a greater degree of centralized wage …