Openness, Central Bank Independence, and the Sacrifice Ratio

Daniels, Joseph P.; Nourzad, Farrokh; VanHoose, David D.

doi:10.1353/mcb.2005.0020

Cited by 60 publications

(110 citation statements)

References 12 publications

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“…Thus, an analysis of inflation and openness in an economy such as the one we have examined would be predicted to reveal a direct relationship between openness and the sacrifice ratio. Indeed, this is consistent with empirical evidence offered by Daniels et al (2005), who demonstrate that once one controls for the degree of central bank independence, a positive relationship between openness and the sacrifice ratio emerges from the same cross-country data considered by Temple (2002).…”

Section: Openness and Optimal Monetary Policysupporting

confidence: 88%

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Openness, the sacrifice ratio, and inflation: Is there a puzzle?

Daniels

VanHoose

2006

Journal of International Money and Finance

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Section: Openness and Optimal Monetary Policysupporting

confidence: 88%

“…Daniels et al (2005), for instance, demonstrate that controlling for just one other structural factor in cross-country data-namely, central bank independence-is sufficient to uncover the positive relationship between openness and the sacrifice ratio predicted by our model.…”

Section: Resultsmentioning

confidence: 74%

Openness, the sacrifice ratio, and inflation: Is there a puzzle?

Daniels

VanHoose

2006

Journal of International Money and Finance

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“…The CBI variable is measured using Cukierman's (1992) index of the legal independence of central banks. This is just one of the indices considered in Daniels et al (2004), though similar results are obtained for each measure of CBI. As the index is available for only a subset of the 38 countries included in Table 4 the sample size falls from 71 to 53.…”

Section: Len Gt H Is the Disin ‡Ation Length In Yearsmentioning

confidence: 53%

“…Daniels et al (2004) show that when CBI and its interaction with openness are added to the sacri…ce ratio regressions in Temple (2002), the slope of the Phillips curve is found to be a decreasing function of openness, the opposite result to that predicted in Romer (1993). This …nding is based on the Ball (1994) estimates of the sacri…ce ratio.…”

Section: Len Gt H Is the Disin ‡Ation Length In Yearsmentioning

confidence: 73%

“…One interpretation of these …ndings and those in Daniels et al (2004) is the following. For much of the period considered by Ball (1994) the mechanisms that might cause the slope of the Phillips curve to increase with openness did not operate because government control of pricing decisions and macroeconomic management based largely on …scal policy prevented the necessary exchange rate and price adjustment.…”

Section: Len Gt H Is the Disin ‡Ation Length In Yearsmentioning

confidence: 77%

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Openness, exchange rate regimes and the Phillips curve

Bowdler

2009

Journal of International Money and Finance

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A number of theoretical models predict that the slope of the Phillips curve increases with trade openness, but cross-country studies provide little evidence for such a correlation. We highlight two reasons for this …nding. Firstly, the strength of the relationship may depend on the extent of exchange rate adjustment, which is a potential determinant of output and in ‡ation dynamics in open economies, but previous studies have not made a distinction between …xed and ‡oating exchange rate regimes.Secondly, existing estimates of the Phillips curve slope are based on data from the 1950s through the 1980s, and are therefore likely a¤ected by price and wage controls, in ‡ationary oil price hikes and the role played by …scal policy in driving output and in ‡ation (the underlying theory requires that monetary shocks dominate). We calculate new measures of the Phillips curve slope using data from 1981-98, a period during which these factors were arguably less important. Regressions based on the new measures indicate that the Phillips curve slope increases with trade openness amongst countries maintaining ‡exible and semi- ‡exible exchange rate regimes, but is unrelated to openness amongst countries maintaining …xed exchange rate regimes.

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On the determinants of Central Bank independence in open economies

D'Amato¹,

Pistoresi

Salsano

2007

Int. J Fin Econ

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We test some positive implications of the commitment hypothesis for the design of monetary institutions in open economies, by studying the determinants of Central Bank independence on a sample of 55 countries, for the period 1980-1989. We document fairly consistent empirical evidence in support of the hypothesis that strategic commitment is indeed important to understand cross-country variation in the level of Central Bank degree of dependence. We also address the related question why only highly industrialized countries have relied on such a solution to the inflationary bias of monetary policy whereas other countries have not. Data suggest that the answer is related to the presence and the size of world-wide common features in the business cycle at country level. Copyright © 2007 John Wiley & Sons, Ltd.

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Openness, Central Bank Independence, and the Sacrifice Ratio

Cited by 60 publications

References 12 publications

Openness, the sacrifice ratio, and inflation: Is there a puzzle?

Openness, the sacrifice ratio, and inflation: Is there a puzzle?

Openness, exchange rate regimes and the Phillips curve

On the determinants of Central Bank independence in open economies

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