TY  - JOUR
AU  - Binyamini,Alon
AU  - Razin,Assaf
TI  - Inflation-Output Tradeoff as Equilibrium Outcome of Globalization
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14379
PY  - 2008
Y2  - October 2008
UR  - http://www.nber.org/papers/w14379
L1  - http://www.nber.org/papers/w14379.pdf
N1  - Author contact info:
Alon Binyamini
Eitan Berglas School of Economics
Tel Aviv University
Tel Aviv 69978
Israel
And Bank of Israel
E-Mail: alonbiny@post.tau.ac.il

Assaf Razin
Department of Economics
Cornell University
Uris 422
Ithaca, NY 14853
Tel: 607/255-9625
Fax: 607/255-2818
E-Mail: ar256@cornell.edu
AB  - The paper provides an integrated   analysis of globalization effects on the inflation-output tradeoff and monetary policy in the New-Keynesian framework. The prediction of the analysis is threefold. First, labor, goods, and capital mobility flatten the Phillips curve, the tradeoff between inflation and activity. Second, the same globalization forces lead the welfare-based monetary policy to be more aggressive with regard to inflation fluctuations, and at the same time, more benign with respect to the output-gap fluctuations. Third, the equilibrium response of inflation to supply and demand shocks is more moderate, and the response of the output gap to these shocks is more pronounced, when the economy opens up; under such welfare-based monetary policy.
ER  -