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Have the free trade agreements reduced inflation rates?

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  • Kwark, Noh-Sun
  • Lim, Hosung

Abstract

Most previous studies have examined extensively the economic effects of free trade agreements (FTAs) such as their effects on economic growth, income distribution across industries, price competitiveness for international trade, trade volume, and the price of a commodity, but not very much on inflation rates. This study empirically estimates how much FTAs affect domestic inflation rates. From the cross-country panel data analysis of 34 OECD countries over the period 1980−2014, the expansion of FTAs shows a significant negative effect on the Consumer Price Index inflation, which is more apparent than the traditionally used openness measure. The inflation reduction effect is more significant in countries with a low level of openness than those with a high level of openness.

Suggested Citation

  • Kwark, Noh-Sun & Lim, Hosung, 2020. "Have the free trade agreements reduced inflation rates?," Economics Letters, Elsevier, vol. 189(C).
    • Handle: RePEc:eee:ecolet:v:189:y:2020:i:c:s0165176520300598
    DOI: 10.1016/j.econlet.2020.109054
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    References listed on IDEAS

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    More about this item

    Keywords

    FTA; Inflation; Panel data analysis;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • F15 - International Economics - - Trade - - - Economic Integration

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