Financial Globalization And Inflation In Developing Countries: A Reappraisal
AbstractA number of economists have stated, and two recent empirical studies have suggested, that financial globalization should exert a positive effect on macroeconomic outcomes in general and inflation in particular. We re-examine the impact of such openness on inflation by exploiting a recent index of capital controls which improves on previous binary measures. In addition, we include one key variable missing from the previous studies-money growth. We find, as did the previous studies, that in the absence of money growth financial (and trade) openness appear to lower inflation. However, once previous money growth is taken into account, financial (and even a proxy for trade) openness exerts no significant effect at all on inflation.
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Bibliographic InfoArticle provided by Euro-American Association of Economic Development in its journal Applied Econometrics and International Development.
Volume (Year): 11 (2011)
Issue (Month): 1 ()
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Web page: http://www.usc.es/economet/eaa.htm
Find related papers by JEL classification:
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- F2 - International Economics - - International Factor Movements and International Business
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
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