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Financial Globalization And Inflation In Developing Countries: A Reappraisal

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  • William MILES
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    Abstract

    A 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 Info

    Article provided by Euro-American Association of Economic Development in its journal Applied Econometrics and International Development.

    Volume (Year): 11 (2011)
    Issue (Month): 1 ()
    Pages:

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    Handle: RePEc:eaa:aeinde:v:11:y:2011:i:1_2

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    Related research

    Keywords: Capital Account; Inflation;

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    References

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    1. Hossain, A., 2005. "The Sources and Dynamics of Inflation in Indonesia: An ECM Model Estimation for 1952-2002," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 5(4).
    2. Maurice Obstfeld, 1998. "The Global Capital Market: Benefactor or Menace?," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 9-30, Fall.
    3. Dani Rodrik & Arvind Subramanian, 2009. "Why Did Financial Globalization Disappoint?," IMF Staff Papers, Palgrave Macmillan, vol. 56(1), pages 112-138, April.
    4. William Miles, 2008. "Exchange rates, inflation and growth in small, open economies: a difference-in-differences approach," Applied Economics, Taylor & Francis Journals, vol. 40(3), pages 341-348.
    5. Bildirici, E. & Cosar, N., 2006. "Inflation and Disinflation Policy in Turkey Between 1974-2002: LSTVAR Analysis," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 6(2).
    6. Woochan Kim, 2003. "Does Capital Account Liberalization Discipline Budget Deficit?," Review of International Economics, Wiley Blackwell, vol. 11(5), pages 830-844, November.
    7. Michael Bleaney & Manuela Francisco, 2005. "Exchange rate regimes and inflation: only hard pegs make a difference," Canadian Journal of Economics, Canadian Economics Association, vol. 38(4), pages 1453-1471, November.
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    Cited by:
    1. POPKOVA, Elena, 2014. "New Prospects Of Economic Growth In Context Of Underdevelopment Whirlpools Phenomena," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 14(1), pages 5-20.

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