Publications
Publications
- June 2005
- Journal of Development Economics
Inflation, Openness, and Exchange Rate Regimes: The Quest for Short-Term Commitment
By: Laura Alfaro
Abstract
This paper further tests Romer's (1993) extension of Kydland and Prescott's (1977) predictions for dynamic-inconsistency problems in open economies. In a panel data set of developed and developing countries from 1973 to 1998, I find that openness does not play a role in restricting inflation in the short-run. On the other hand, a fixed exchange-rate regime plays a significant role. The results are robust to controlling for other variables that determine inflation, performing sensitivity analysis, and using a de facto exchange-rate regime classification.
Keywords
Forecasting and Prediction; Economy; Currency Exchange Rate; Developing Countries and Economies; Inflation and Deflation
Citation
Alfaro, Laura. "Inflation, Openness, and Exchange Rate Regimes: The Quest for Short-Term Commitment." Journal of Development Economics 77, no. 1 (June 2005): 229–249.