Recent papers have documented a robust negative correlation between openness to trade and average inflation. The usual argument is that openness makes the Phillips curve steeper, leading to a lower rate of inflation in equilibrium. The relationship between openness and inflation is then seen as evidence in favor of time consistency theories of monetary policy. However, in this note I show that standard measures of the output-inflation trade-off are not correlated with openness. Hence the usual argument is almost certainly wrong, and the observed link between openness and inflation becomes an interesting puzzle.

By comparing countries like Venezuela and Chile, China and India, Dominican Republic and Haiti, and others, the book tries to answer the questions of which institutions and policies are crucial for stable long term economic growth.