International Trade and the Connection between Excess Demand and Inflation

• DOI: 10.1111/j.1467-9396.2005.00532.x
• Publication Date: 2005-09-16T09:29:53Z
• Authors: Albert S. Dexter; Maurice D. Levi; Barrie R. Nault
• Keywords: Openness to experience; Consumption

This paper demonstrates that globalization, taking the form of a higher import component consumption and larger export GDP, is cause apparent breakdown in relationship between excess demand inflation. Within parsimonious empirical framework, we show increasing openness US economy all needed to re-establish inflation capacity utilization. We also international trade has significant separate influence on inflation, important for identifying Phillips curve unemployment