International competition and inflation
Subtitle: a new Keynesian perspective
By: Luca Guerrieri, Christopher Gust, and David Lopez-Salido.
Contributors: Gust, Christopher J.; Lopez-Salido, David.; Board of Governors of the Federal Reserve System (U.S.)
Series: International finance discussion papers -- no. 918; International finance discussion papers (Online) -- no. 918.
Publisher: Federal Reserve Board
Published: 2008
Place of publication: Washington, D.C
Language: eng
Format: Electronic resource
Description: "We develop and estimate an open economy New Keynesian Phillips curve (NKPC) in which variable demand elasticities give rise to changes in desired markups in response to changes in competitive pressure from abroad.  A parametric restriction on our specification yields the standard NKPC, in which the elasticity is constant, and there is no role for foreign competition to influence domestic inflation.  By comparing the unrestricted and restricted specifications, we provide evidence that foreign competition plays an important role in accounting for the behavior of inflation in the traded goods sector.  Our estimates suggest that foreign competition has lowered domestic goods inflation about 1 percentage point over the 2000-2006 period.  Our results also provide evidence against demand curves with a constant elasticity in the context of models of monopolistic competition"--Federal Reserve Board web site.
Notes: Title from PDF file as viewed on 1/31/2008.

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