Research @ BaylorBusiness -- Hankamer School of Business
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Browsing Research @ BaylorBusiness -- Hankamer School of Business by Author "Daniels, Joseph P."
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Item Openness, Central Wage Bargaining, and Inflation(2005-08-13T17:49:37Z) Daniels, Joseph P.; Nourzad, Farrokh; VanHoose, David D.This paper develops a model of an open economy containing both sectors in which wages are market-determined and sectors with wage-setting arrangements. A portion of the latter group of sectors coordinate their wages, taking into account that their collective actions influence the equilibrium inflation outcome in an environment in which the central bank engages in discretionary monetary policymaking. Key predictions forthcoming from this model are (1) increased centralization of wage setting initially causes inflation to increase but then results in an inflation dropoff, (2) a greater degree of centralized wage setting reduces the inflation-restraining effect of greater central bank independence, and (3) increased openness is more likely to reduce inflation in nations with less centralized wage bargaining. Analysis of data for seventeen nations for the period 1970-1999 provides generally strong and robust empirical support for all three of these predictions.Item Openness, the Sacrifice Ratio, and Inflation: Is there a Puzzle?(2005-08-13T17:45:15Z) Daniels, Joseph P.; VanHoose, David D.The standard time-inconsistency-based explanation for the negative correlation between openness and inflation requires an inverse relationship between the sacrifice ratio and openness, but Daniels et al. (forthcoming) have provided evidence that controlling for central bank independence reveals a positive relationship. This paper embeds the time-inconsistency approach within a model of a multisector, imperfectly competitive, open economy. In this setting, greater openness raises the sacrifice ratio but reduces the inflation bias. Thus, failure to observe an inverse relationship between openness and the sacrifice ratio does not necessarily imply that the time-inconsistency approach is irrelevant to understanding the openness-inflation relationship.