The "New Keynesian" Phillips Curve: Closed Economy vs. Open Economy
NBER Working Paper No. 8313
The paper extends Woodford's (2000) analysis of the closed economy Phillips curve to an open economy with both commodity trade and capital mobility. We show that consumption smoothing, which comes with the opening of the capital market, raises the degree of strategic complementarity among monopolistically competitive suppliers, thus rendering prices more sticky and magnifying output responses to nominal GDP shocks.
Published: Razin, Assaf and Chi-Wa Yuen. "The 'New Keynesian' Phillips Curve: Closed Economy Versus Open Economy," Economics Letters, 2002, v75(1,Mar), 1-9.