Capital mobility and the output-inflation tradeoff

Prakash Loungani*, Assaf Razin, Chi Wa Yuen

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


Identifying determinants of the output-inflation tradeoff has 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 the predictions of a version of the Mundell-Fleming model. Restrictions on capital mobility are measured using the IMF's Annual Report on Exchange Rate Arrangements and Exchange Restrictions. Estimates of the output-inflation tradeoff are taken from previous studies (viz., Lucas [Am. Econ. Rev. 63 (1973)] and Ball, Mankies and Romer 19 (1988)).

Original languageEnglish
Pages (from-to)255-274
Number of pages20
JournalJournal of Development Economics
Issue number1
StatePublished - 2001


  • Capital controls
  • Capital mobility
  • Openness
  • Output-inflation tradeoff


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