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Number 2, April 2007
Openness and Inflation
Mark A. Wynne and Erasmus K. Kersting
Complete issue 
Abstract
This paper reviews the evidence on the relationship between openness
and inflation. There is a robust negative relationship across countries, first
documented by Romer (1993), between a country's openness to trade and
its long-run inflation rate. However, a key part of the standard explanation
for this relationship—that central banks have a smaller incentive to
engineer surprise inflations in more-open economies because the Phillips
curve is steeper—seems at odds with the facts. While the United States is
still not a very open economy by conventional measures, there are channels
through which global developments may influence the nation's inflation.
We document evidence that global resource utilization may play a
role in U.S. inflation and suggest avenues for future research.
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