Skip navigation
User training | Reference and search service

Library catalog

Content aggregators
Please use this identifier to cite or link to this item:

Title: Inflation dynamics in open economies: empirical evidence for G7 countries on the role of import prices and the cost channel
Authors: Lagoa, S.
Keywords: Inflation
Open economy New Keynesian Phillips Curve
Cost channel
Issue Date: 26-Apr-2013
Series/Report no.: Working Papers
Abstract: The supply side effects of nominal interest rate and import prices on inflation are very important for the design of monetary policy. However, the empirical identification of the cost channel has ignored import prices. We start by developing a model which shows that ignoring import prices in the estimation of the cost channel may lead to wrong results. Taking this into account, we study the empirical relevance of the cost channel and import prices using the New Keynesian Phillips Curve (NKPC) for the G7 countries. In order to introduce import prices in the NKPC, we test several ways in which imports can affect inflation. It is assessed if imports should be treated as inputs and/or consumption goods, and also if there is immediate or slow exchange rate passthrough. Finally, besides the traditional concept of cost channel, where wages are paid in advance, it is tested whether is relevant to extend the cost channel assuming that imports of final consumption goods are also paid in advance. Empirical results indicate that the cost channel is present in imported consumption good and open economy variables play an important role in explaining inflation dynamics.
Peer reviewed: Sim
DOI: 10.7749/dinamiacet-iul.wp.2011.19
Appears in Collections:DINÂMIA'CET-WP - Working papers com arbitragem científica

Files in This Item:
File Description SizeFormat 
DINAMIA_WP_2011-19.pdf1.07 MBAdobe PDFView/Open

FacebookTwitterDeliciousLinkedInDiggGoogle BookmarksMySpace
Formato BibTex MendeleyEndnote Currículo DeGóis 

Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.