Capital Mobility and the Output-Inflation Tradeoff

  title={Capital Mobility and the Output-Inflation Tradeoff},
  author={Prakash Loungani and A. Razin and C. Yuen},
Identifying determinants of the output-inflation tradeoff has long been a key issue in business cycle research. We provide evidence that in countries with greater restrictions on capital mobility, a given reduction in the inflation rate is associated with a smaller loss in output. This result is shown to be consistent with theoretical presumption from a version of the Mundell-Fleming model. Restrictions on capital mobility are measured using the IMF's Annual Report on Exchange Rate Arrangements… Expand
36 Citations


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