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Abstract

Evolving openness to trade is hard to measure, despite its relevance to models of growth, inflation and exchange rates. Our innovative technique measures trade openness encompassing both observable trade policy (tariffs and surcharges) and unobservable trade policy (quotas and other nontariff barriers), capturing the latter by a smooth non-linear stochastic trend in a model for the share of manufactured imports in home demand for manufactured goods, controlling for the business cycle and exchange rate. The evidence for South Africa suggests that increased openness has significantly reduced the mean inflation rate and has reduced the exchange rate pass-through into wholesale prices.

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Bibliographic Info

Paper provided by Centre for the Study of African Economies, University of Oxford in its series CSAE Working Paper Series with number 2007-11.

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Date of creation: 2007
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Handle: RePEc:csa:wpaper:2007-11

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Find related papers by JEL classification:

• F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
• F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
• E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
• C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models

References

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Cited by:

1. Tahir Mukhtar, 2010. "Does Trade Openness Reduce Inflation? Empirical Evidence from Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 15(2), pages 35-50, Jul-Dec.

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