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863. Inflation and conflicting claims in the open economy

Working Papers n.863 - Ottobre 2021

Guilherme Spinato Morlin

PhD Student, Department of Economics and Statistics, University of Siena

Abstract

Exchange rates and international prices are fundamental to explain inflation in open economies. Conflict inflation models account for these variables by including imported inputs and, in some cases, a distributive impact of exchange rates. A different viewpoint emerges from the Classical-Keynesian theory of distribution for a price-taker open economy. Thus, we explore this alternative by developing a conflict inflation model building on Classical Keynesian approach. The paper contributes to the literature by combining the conflicting claims approach with the Classical-Keynesian open economy framework. Including tradable prices, the model considers their direct impact on distribution. Therefore, it addresses a cause of inflation overlooked in the literature. Finally, conflict inflation affects the real exchange rate, which becomes an important distributive variable

Jel Codes

B51; D33; E11; E31 F41