【Abstract】

A cross-country parameter homogeneity assumption is usually imposed in the literature to test the effect of trade openness on the slope of the Phillips curve. A conclusion from this literature is that trade openness has no significant effect in advanced industrial countries. In this paper, we argue that the validity of the parameter homogeneity assumption is not guaranteed from a theoretical perspective, and we find that this assumption is not valid for advanced industrial countries. Trade openness has significant effects on the slope of the Phillips curve in several industrial countries but the signs of the effects vary across countries.

【Keywords】

Openness, Phillips Curve, Heterogeneity

【Authors】

Sylvester C.W. Eijffinger, CenterER and EBC, Tilburg University

Qian Zongxin, Research Fellow of IMI, Associate Professor of School of Finance, Renmin University of China.