. Relationship between Trade Openness and Inflation: Empirical Evidences from Pakistan (1976–2010)
AbstractThis study empirically verifies the existence of significant relationship between inflation and trade openness for Pakistan using annual time-series data for the period of 1976 to 2010. The basic objective of this study is to examine the Romer‘s hypothesis for Pakistan with real agriculture value added, real exchange rate, real gross domestic product, financial market openness, money and quasi money and used trade openness, import openness and export openness ratios separately as explanatory variables with inflation rate as dependent variables. For this purpose, we have used multivariate Johansen (1998) and Johansen and Juselius (1990) Maximum Likelihood Cointegration Approach and a Vector Error Correction Model (VECM) and the expected empirical findings shows that there is a significant positive long-run relationship between inflation and trade openness, which rejects the existence of Romer‘s hypothesis for Pakistan.
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Bibliographic InfoArticle provided by Pakistan Institute of Development Economics in its journal The Pakistan Development Review.
Volume (Year): 50 (2011)
Issue (Month): 4 ()
Trade Openness; Inflation; Unit Root Testing; Multivariate Cointegration Approach; Vector Error Correction Model; Pakistan;
Find related papers by JEL classification:
- B26 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Financial Economics
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- P24 - Economic Systems - - Socialist Systems and Transition Economies - - - National Income, Product, and Expenditure; Money; Inflation
- P44 - Economic Systems - - Other Economic Systems - - - National Income, Product, and Expenditure; Money; Inflation
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