Journal of Economic and Social Research 8(1), 1-18 Does the Effectiveness of Monetary Policy on Output Depend on Openness? Nihat Işık * & Mustafa Acar ** Abstract. The question of how openness influences the effectiveness of monetary policy on output has captured some attention among researchers in recent years. But the number of studies which have explored this question empirically is very limited. In this context, this paper investigates the relationship between openness and the effectiveness of monetary policy on output by using annual data for the period 1990- 2000 for a panel of 42 countries. The paper’s empirical results support the theoretical expectations that the more open the economy, the smaller the output effects of a given change in the money supply. Moreover, the ability of monetary expansion to influence output is more limited in developing open economies than in developed ones. JEL Classification Codes: E52; F41 Keywords: Openness, monetary policy, output. 1. Introduction As economies have become more open and integrated since the early 1980s, it has become a relevant question to explore whether the effects of monetary policy on output depend on the degree of openness of a given economy. Both theoretical and empirical literature has focused so far on the effect of changes in money supply on output. There have been many studies in the literature investigating the effects of monetary policy on output, and most of * Selçuk University, Faculty of Economic and Administrative Sciences of Karaman, Department of Economics. ** Kırıkkale University Faculty of Economic and Administrative Sciences, Department of Economics. All correspondence should be directed to this author: acarm@superonline.com