A common feature for developing countries that have experienced a sharp drop in inflation without large output losses is the extensive use of capital controls. This study shows that capital controls significantly improve the sacrifice ratio. This element contributes to the explanation of small...

The Paper derives an open economy New-Keynesian Phillips curve. The Phillips curve depends on growth in the domestic economy excess capacity, differential growth between foreign output and domestic output, and on the surprise depreciation of the real exchange rate. The Paper provides new...

The paper analyses how globalization forces induce monetary authorities, guided in their policies by the welfare criterion of a representative household, to put greater emphasis on reducing the inflation rate than on narrowing the output gaps. We demonstrate that the marginal rate of...